Document:

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EXHIBIT 10.2

EXECUTION VERSION

PURCHASE AGREEMENT

(FPAS)

      This Purchase Agreement (the “Agreement”) is made this 28th day of April, 2005, by
and between Liberty Pan American Sports, Inc., a Delaware corporation (“LPAS”), and Pan American
Sports Enterprises Company, a Delaware corporation (“PASEC”).

RECITALS

      A. LPAS is the holder of (i) 17,500,314 limited liability company shares (the “FPAS Shares”)
of Fox Pan American Sports LLC, a Delaware limited liability company (“FPAS”), representing a
10.5583% ownership interest in FPAS and (ii) a subordinated convertible promissory note dated April
28, 2003 in the original principal amount of $4,000,000 (the “FPAS Debt”) issued by FPAS to LPAS’s
predecessor-in-interest, Liberty Finance LLC (“Finance”), pursuant to the terms of the Credit
Agreement (as defined below).

      B. PASEC desires to purchase the FPAS Shares and FPAS Debt from LPAS, and LPAS desires to sell
the FPAS Shares and the FPAS Debt to PASEC, for $5,000,000 in cash upon the terms and subject to
the conditions set forth herein.

AGREEMENT

      NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants
herein contained, and intending to be legally bound, LPAS and PASEC hereby agree as follows:

ARTICLE 1

DEFINITIONS 

      1.1. Defined Terms. Capitalized terms used in this Agreement shall have the following
meanings:

      (a) “ACH Purchase Agreement” shall mean the purchase agreement dated as of the date hereof
between AMI Cable Holdings, Ltd., an exempt limited company formed under the laws of The Cayman
Islands (“AMICH”), and Liberty Latin Partners, Inc., a Delaware corporation (“LLP”), pursuant to
which, contemporaneously with the consummation of the transactions contemplated in this Agreement,
AMICH is selling and LLP is acquiring all of the issued and outstanding shares of stock of ACH
Acquisition Co. Ltd., a Cayman Islands limited company.

      (b) “Acknowledgement” shall mean the acknowledgment executed by PASEC in the form of
Exhibit A to this Agreement.

      (c) “Affiliate” shall mean, with respect to any Person, any Person that directly or
indirectly Controls, is Controlled by, or is under common Control with such Person.

 

 

      (d) “Agreement” shall have the meaning specified in the preamble.

      (e) “Ávila Non-Competition Agreement” shall mean the Non-Competition Agreement dated January
31, 2002 among Carlos Vicente Ávila, Liberty Media Corporation, International Sports Programming,
LLC, Pan American Sports Holdings Ltd., Jose Hawilla, Luis Benjamín Nofal, and Telefónica de
Contenidos, S.A. (formerly known as Telefónica Media, S.A.).

      (f) “Business Day” shall mean any day other than Saturday, Sunday or a day on which banking
institutions in Denver, Colorado or Dallas, Texas are required or authorized to be closed.

      (g) “Control” shall mean the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

      (h) “Counterpart Signature Page” shall mean the counterpart signature page to the FPAS
Operating Agreement executed by PASEC in the form of Exhibit B to this Agreement.

      (i) “Credit Agreement” shall mean the subordinated convertible credit agreement dated as of
April 28, 2003 among FPAS, Finance, PASEC and 19th Holdings Corporation.

      (j) “Finance” shall have the meaning specified in the recitals.

      (k) “FPAS” shall have the meaning specified in the recitals.

      (l) “FPAS Debt” shall have the meaning specified in the recitals.

      (m) “FPAS Operating Agreement” shall mean the Limited Liability Company Operating Agreement
of Fox Pan American Sports LLC dated February 5, 2002 among FPAS, FSI SPV, Finance and PASEC, as
amended by the first amendment thereto dated April 28, 2003 and the second amendment thereto dated
January 1, 2004.

      (n) “FPAS Shares” shall have the meaning specified in the recitals.

      (o) “FSI SPV” shall mean FSI SPV, Inc., a Delaware corporation.

      (p) “Interest” shall mean each of the FPAS Shares and the FPAS Debt.

      (q) “Lien” shall mean any lien, pledge, encumbrance, security interest, mortgage, charge,
agreement or claim of any kind whatsoever.

      (r) “LPAS” shall have the meaning specified in the preamble.

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      (s) “Nofal Non-Competition Agreement” shall mean the Non-Competition Agreement dated February
5, 2002 among Luis Benjamín Nofal, Liberty Media Corporation, International Sports Programming,
LLC, PASEC and FPAS.

      (t) “Other Agreements” shall mean the Acknowledgment, the Counterpart Signature Page and the
Release.

      (u) “Party” shall mean each of the parties to this Agreement.

      (v) “PASEC” shall have the meaning specified in the preamble.

      (w) “PASEC Assumed Obligations” shall mean the obligations assumed by PASEC as described in
Section 2.1(b).

      (x) “Permitted Lien” shall mean any Lien encumbering an Interest for taxes not yet due or
which are being contested in good faith.

      (y) “Person” shall mean a human being or a corporation, partnership, limited liability
company, limited liability partnership, trust, unincorporated organization, association or other
entity.

      (z) “Related Documents” shall mean the Subordination Agreement and all other documents
entered into by Finance in connection with the FPAS Debt and the Credit Agreement.

      (aa) “Release” shall mean the release of LPAS and Finance from any further liability under
the FPAS Operating Agreement in the form of Exhibit C to this Agreement.

      (bb) “Subordination Agreement” shall mean the Subordination and Intercreditor Agreement dated
April 28, 2003 among Finance, PASEC, 19th Holdings Corporation, International Sports
Programming LLC, FPAS and FSLA Holdings, Inc.

      (cc) “TyC” shall mean Torneos y Competencias, S.A., a sociedad anónima organized under the
laws of Argentina.

ARTICLE 2

PURCHASE AND SALE OF THE INTERESTS

      2.1. Transfer of LPAS’s Interests. Subject to the consummation of the transactions
contemplated in the ACH Purchase Agreement, (a) LPAS hereby transfers and conveys to PASEC the FPAS
Shares and the FPAS Debt, free and clear of all Liens (other than Permitted Liens or Liens created
pursuant to this Agreement, the FPAS Operating Agreement, the Credit Agreement or the Related
Documents), and (b) PASEC hereby assumes and agrees to perform and discharge when due all
obligations of LPAS, Finance and their respective Affiliates under the FPAS Operating Agreement,
the Credit Agreement and the Related Documents (the “PASEC Assumed Obligations”) other than any
obligation arising out of a breach by LPAS, Finance or any of their respective Affiliates of the
terms of the FPAS Operating Agreement, the Credit Agreement or the Related Documents applicable to such entity prior to the date of this
Agreement.

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      2.2. Purchase Price. As consideration for the Interests, simultaneously with the
execution of this Agreement, PASEC is paying to LPAS US $5,000,000 in cash (the “Purchase Price”).

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF LPAS

      LPAS represents and warrants to PASEC as follows:

      3.1. Organization and Authority. LPAS is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware. LPAS has all requisite
power and authority to execute, deliver and perform its obligations under this Agreement.

      3.2. Actions and Enforceability. All actions on the part of LPAS necessary under its
organizational documents for the authorization of this Agreement and for the performance of all
obligations of LPAS hereunder have been taken. This Agreement has been duly executed and delivered
by LPAS and constitutes a legal, valid and binding obligation of LPAS enforceable against LPAS in
accordance with its terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting enforcement of creditors’
rights and (ii) general principles of equity that restrict the availability of equitable remedies.

      3.3. Ownership of FPAS Shares and FPAS Debt. LPAS is the legal, record and beneficial
owner of the FPAS Shares and the FPAS Debt; provided, that, for purposes of Argentine law only,
LPAS will be the legal, record and beneficial owner of the FPAS Shares and the FPAS Debt only upon
(i) consummation of the transactions contemplated in this Agreement and the ACH Purchase Agreement,
and (ii) compliance with Resolution 134, issued by the Secretariat of Technical Coordination on
September 29, 2004 (the “Resolution”), including the filing of all relevant documents as required
by the Resolution. Upon payment of the Purchase Price, and subject to the consummation of the
transactions contemplated in the ACH Purchase Agreement, PASEC shall acquire lawful and valid title
to the FPAS Shares and the FPAS Debt, free and clear of any and all Liens other than Permitted
Liens or Liens created pursuant to this Agreement, the FPAS Operating Agreement, the Credit
Agreement or the Related Documents. Other than the FPAS Shares and the FPAS Debt, LPAS is not,
directly or indirectly, the legal, record or beneficial owner of any securities or other ownership
interests in FPAS and has no rights to acquire any securities or other ownership interests in FPAS
other than any such rights under the FPAS Operating Agreement to which PASEC will succeed.

      3.4. Actions. There is no action, suit, investigation or proceeding, governmental or
otherwise, pending, or to the knowledge of LPAS threatened, against LPAS specifically relating to
the transactions under this Agreement, nor, to the knowledge of LPAS, is there any basis for such
actions, suits investigations or proceedings. LPAS has no basis for any

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action or suit against FPAS, the Board of Directors of FPAS and/or the other owners of FPAS
arising out of or relating to the investment by LPAS in FPAS.

      3.5. No Other Representations or Warranties. EXCEPT AS SET FORTH IN THE PRECEDING
PROVISIONS OF THIS ARTICLE 3, LPAS IS NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES REGARDING
THE FPAS SHARES, THE FPAS DEBT OR FPAS, AND THE FPAS SHARES AND THE FPAS DEBT ARE BEING ACQUIRED BY
PASEC “AS IS,” “WHERE IS,” WITH AND SUBJECT TO ALL FAULTS AND DEFECTS THEREIN AND WITHOUT ANY
REPRESENTATION, WARRANTY OR GUARANTEE OF ANY KIND, EITHER EXPRESS OR IMPLIED, ARISING OUT OF LAW OR
OTHERWISE, INCLUDING ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PASEC

      PASEC represents and warrants to LPAS as follows:

      4.1. Organization and Authority. PASEC is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. PASEC has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement.

      4.2. Actions and Enforceability. All actions on the part of PASEC necessary under its
organizational documents for the authorization of this Agreement and for the performance of all
obligations of PASEC hereunder have been taken. This Agreement has been duly executed and
delivered by PASEC and constitutes a legal, valid and binding obligation of PASEC enforceable
against PASEC in accordance with its terms, except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application affecting enforcement
of creditors’ rights and (ii) general principles of equity that restrict the availability of
equitable remedies.

      4.3. Actions. There is no action, suit, investigation or proceeding, governmental or
otherwise, pending, or to the knowledge of PASEC threatened, against PASEC specifically relating to
the transactions under this Agreement, nor, to the knowledge of PASEC, is there any basis for such
actions, suits investigations or proceedings.

      4.4. Related Party. PASEC is a Related Party (as defined in the FPAS Operating
Agreement) of HMTF (as defined in the FPAS Operating Agreement).

      4.5. Unregistered Interests. PASEC (a) acknowledges that neither the FPAS Shares nor
the FPAS Debt have been registered under the United States Securities Act of 1933, as amended, or
under similar provisions of state law or the laws of any applicable foreign jurisdiction, (b)
represents and warrants that PASEC is acquiring such Interests for PASEC’s own account, for
investment, and without a view to the distribution of such Interests, and (c) agrees not to sell,
transfer or otherwise dispose of, or to attempt to sell, transfer or otherwise dispose of, all or
any part of such Interests without registration under the Securities Act of 1933, as amended, and
any applicable state securities laws or similar laws of any applicable foreign
jurisdiction, unless such sale, transfer or other disposition is exempt from such registration
requirements.

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ARTICLE 5

OTHER COVENANTS AND AGREEMENTS

      5.1. Commercially Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the Parties shall use its commercially reasonable efforts to do, or cause to be
done, all actions and things necessary, proper, or advisable under applicable law and regulations
to make effective the transactions under this Agreement. If at any time after the consummation of
the transactions contemplated by this Agreement, any further action is necessary to comply with
this Agreement, the Parties or their duly authorized representatives shall take such action.

      5.2. Argentina Antitrust Proceedings. Each Party acknowledges that the proceedings
identified on Schedule 5.2 of this Agreement remain open before the Argentina antitrust authorities
and agree that the existence of such proceedings does not conflict with any representation or
warranty made by any Party under this Agreement.

ARTICLE 6

DELIVERABLES UPON EXECUTION

      6.1. Time and Place. Signature pages to this Agreement are being delivered by the
Parties at the offices of Sherman & Howard L.L.C., 633 Seventeenth Street, Denver, Colorado, upon
prior or simultaneous completion of the actions required by Section 6.2.

      6.2. Actions Occurring at or Prior to Signing.

      (a) LPAS has delivered to PASEC certificates evidencing the FPAS Shares with appropriate unit
powers, the promissory note evidencing the FPAS Debt with appropriate endorsements, and/or such
other instruments or documents as may be necessary or appropriate to properly transfer to PASEC
title to the FPAS Shares and the FPAS Debt, free and clear of all Liens (other than Permitted
Liens or Liens created pursuant to this Agreement, the FPAS Operating Agreement, the Credit
Agreement or the Related Documents);

      (b) PASEC has delivered the Purchase Price to LPAS by wire transfer of immediately available
funds, in accordance with instructions provided by LPAS to PASEC;

      (c) PASEC has executed and delivered the Acknowledgment required under the Subordination
Agreement;

      (d) PASEC has executed and delivered the Counterpart Signature Page;

      (e) Each of FSI SPV, PASEC, LPAS, Finance and FPAS has executed and delivered the Release;

      (f) A termination agreement terminating each of the Nofal Non-Competition Agreement and the
Ávila Non-Competition Agreement has been executed and delivered; and

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      (g) Each of Liberty Media Corporation, Liberty Media International, Inc., PSE Holdings, LLC
and International Sports Programming LLC has executed a letter as of the date of this Agreement
ratifying the commitment to the Argentina antitrust authorities to refrain from entering into any
contractual arrangements for TyC to act as the agent of FPAS in the sale of sports programming
content of the “Fox Sports” channel for pay-TV systems in Argentina.

      6.3. Post-Signing Filing. Within two days following the date of this Agreement, the
Parties shall cause to be filed with the appropriate Argentina antitrust authorities executed
copies of the following:

      (a) this Agreement, together with its schedules and exhibits;

      (b) the Acknowledgement;

      (c) the Counterpart Signature Page;

      (d) the Release;

      (e) the termination agreement described in Section 6.2(f); and

      (f) the ratification letter described in Section 6.2(g).

ARTICLE 7

INDEMNIFICATION

      7.1. Indemnification by LPAS. LPAS hereby indemnifies and agrees to defend and hold
harmless PASEC, its Affiliates, and each of their respective directors, officers, employees and
agents (each, a “PASEC Indemnified Party”), from and against any and all claims, liabilities,
losses, costs and expenses, including reasonable attorneys’ fees and expenses, known or unknown,
contingent or otherwise, arising at any time out of or relating to any material misrepresentation
or material breach of any warranty, covenant or agreement made by LPAS under this Agreement
(collectively, “PASEC Losses”).

      7.2. Indemnification by PASEC. PASEC hereby indemnifies and agrees to defend and hold
harmless LPAS, its Affiliates and each of their respective directors, officers, employees and
agents (each, an “LPAS Indemnified Party”), from and against any and all claims, liabilities,
losses, costs and expenses, including reasonable attorneys’ fees and expenses, known or unknown,
contingent or otherwise, arising at any time (including any time prior to the date of this
Agreement) out of or relating to (a) any material misrepresentation or any material breach of any
warranty, covenant or agreement made by PASEC or any of its Affiliates under this Agreement or the
Other Agreements, (b) any claim by any third party made against LPAS or against Finance solely in
its capacity as, or as a result of its having been, an owner or former owner of FPAS or the holder
or former holder of the FPAS Debt or (c) the PASEC Assumed Obligations (collectively, “LPAS Losses”
and, together with PASEC Losses, “Losses”).

      7.3. Notice; Cooperation. Notwithstanding anything in this Agreement to the contrary,
the liability of a Party (the “Indemnifying Party”) that is required to indemnify an LPAS
Indemnified Party or a PASEC Indemnified Party entitled to indemnification under this

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Agreement (the “Indemnified Party”) against any Losses shall be limited to claims (“Claims”)
with respect to which the Indemnified Party shall have given written notice thereof to the
Indemnifying Party, whether or not any Losses have then actually been sustained (“Claims Notice”).
The Claims Notice shall state the basis of the Claim and provide a statement or an estimate of the
Losses incurred by the Indemnified Party; provided, however, that no statement of Losses or
estimate of Losses provided in such Claims Notice shall be conclusive and final. A Claims Notice
for a Claim described in this Section may be given at any time. Each Party agrees that, upon
receiving notice of any Claim which reasonably may be expected to give rise to a claim for
indemnification under this Agreement, such Party promptly will provide a Claims Notice to each
other Party of such Claim. Each Party further agrees to make available to each other Party such
information as is, or as comes within, the possession of such Party that reasonably may be expected
to assist in the defense of such Claim and to cooperate with each other Party in defending against
such Claim.

      7.4. Procedure for Administering Third-Party Claims.

       (a) In the event that a Claim involves a claim by a third party against the Indemnified Party
(a “Third-Party Claim”), the Indemnifying Party shall notify the Indemnified Party in writing
within 15 days after receipt of the Claims Notice whether it agrees to undertake the defense
thereof. In the event the Indemnified Party fails to timely provide a Claims Notice pursuant to
the terms of Section 7.3 hereof and such failure materially increases the Indemnifying Party’s
obligations or liabilities with respect to the underlying Claim, then the Indemnified Party shall
be conclusively deemed to have waived its defense and indemnification rights with respect to such
Claim to the extent, and only to the extent, that such failure increased such obligations or
liabilities.

       (b) The following procedures shall apply to a Claim for defense and indemnity by the
Indemnified Party which is based upon a Third-Party Claim:

              (i) Promptly after receipt by the Indemnifying Party of the Claims Notice, the Indemnifying
Party shall: (A) acknowledge the Third-Party Claim for which a defense and indemnity is sought by
the Indemnified Party as a valid Claim and shall forthwith defend or fully discharge such
Third-Party Claim; (B) notify the Indemnified Party of the Indemnifying Party’s election to defend
the Indemnified Party against such Third-Party Claim under a partial or complete reservation of
rights, which notice shall include a reasonably detailed statement of the reasons for such
reservation; or (C) notify the Indemnified Party of its rejection of the Indemnified Party’s Claim
for defense and indemnity against such Third-Party Claim. A failure by the Indemnifying Party to
respond within a reasonable time period following the Claims Notice shall be deemed acknowledgment
by the Indemnifying Party of the right of the Indemnified Party to be defended and indemnified
without any reservation of rights and will give rise to an immediate right in the Indemnified Party
to payment of the Claim in full by the Indemnifying Party.

              (ii) If the Indemnifying Party elects to assume the defense of a Third-Party Claim pursuant to
Section 7.4(b)(i)(A) or (B) above:

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                     (A) except as otherwise provided in this Section 7.4(b)(ii)(A) or in Section 7.4(b)(ii)(B)
below, counsel for the defense of the Indemnified Party assumed by the Indemnifying Party shall be
selected by the Indemnifying Party with the approval of the Indemnified Party, which approval shall
not be unreasonably withheld; provided, however, that, if the Indemnifying Party has elected to
defend under a reservation of rights, the Indemnified Party may select counsel for the defense.
The control of the defense of the Indemnified Party shall be with the Indemnifying Party, and the
Indemnified Party shall cooperate with the Indemnifying Party in the conduct of its defense;
provided, however, that if the Indemnifying Party has elected to defend under a reservation of
rights, the Indemnified Party may control the defense, and the Indemnifying Party shall cooperate
with the Indemnified Party in the conduct of the latter’s defense. All attorneys’ fees and legal
costs reasonably incurred in the defense of the Indemnified Party by the Indemnifying Party shall
be borne, and promptly paid, by the Indemnifying Party. If it is necessary for some action to be
taken or defense to be asserted in respect of the Third-Party Claim prior to confirmation by the
Indemnifying Party that it will assume such defense, the Indemnified Party shall assume such
defense with counsel selected by the Indemnified Party for the limited purpose of contesting such
Third-Party Claim until the Indemnifying Party assumes such defense, and the Indemnifying Party
shall promptly pay all Litigation Costs (defined below) reasonably incurred by the Indemnified
Party in conducting its defense against the Third-Party Claim. A failure by the Indemnifying Party
to timely assume and conduct the defense of the Indemnified Party against the Third-Party Claim
shall be treated for all purposes as a waiver by the Indemnifying Party of the right to deny the
Indemnifying Party’s claim for defense and indemnity against such Third-Party Claim;

                     (B) notwithstanding the provisions of Section 7.4(b)(ii)(A):

                            (I) the Indemnified Party may retain separate co-counsel at its sole cost and expense, except
that the Indemnifying Party will be responsible for the fees and expenses of the co-separate
counsel (not to exceed the fees and expenses of one separate United States firm of attorneys plus
one separate Argentinean firm of attorneys for all Indemnified Parties) (a) to the extent the
Indemnified Party reasonably concludes based upon advice of counsel that a conflict of interest
other than a conflict of interest caused solely by the right of indemnification contained in this
Agreement exists between the Indemnified Party and Indemnifying Party or (b) the named parties to
any such action (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party and such Indemnified Party has been advised by counsel that there may be one or
more legal defenses that are available to the Indemnified Party that are not available to the
Indemnifying Party or that are available to the Indemnifying Party but the assertion of which would
be adverse to the interest of the Indemnified Party; and

                            (II) if the character of a Third-Party Claim is such that it is covered by insurance policies
maintained or previously maintained by or for the benefit of the Indemnified Party and the insurer
under such policies is entitled to select counsel to defend the Indemnified Party against such
Third-Party Claim, then counsel selected by such insurer shall assume and conduct the defense of
the Indemnified Party against such Third-Party Claim. In the event that such an insurance carrier
assumes and conducts the defense of the Indemnified Party against the Third-Party Claim, any
Litigation Costs required to be borne by the Indemnified Party under the applicable policy shall in
turn be borne by the Parties as if such Litigation Costs
were the result of a defense assumed and conducted by the Indemnifying Party absent the insurance
coverage; and

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                     (C) the Indemnifying Party may settle or compromise any Third-Party Claim defended by it
without the consent of the Indemnified Party, but only if such settlement or compromise involves
only the payment of monetary consideration by the Indemnifying Party or consideration or agreements
given by the Indemnifying Party of a non-monetary nature which have no adverse effect on the
Indemnified Party and does not involve any admission of liability, or stipulations of fact which,
in the reasonable belief of the Indemnified Party might have an adverse effect on the Indemnified
Party or which might materially prejudice it in subsequent or other litigation. In the event of a
settlement or compromise pursuant to this Section 7.4(b)(ii)(C), the Indemnifying Party shall pay
and otherwise satisfy in full such settlement or compromise and shall pay all Litigation Costs that
the Indemnified Party incurs with respect thereto. If a final judgment is rendered against the
Indemnified Party in respect of a Third-Party Claim, then the Indemnifying Party shall promptly
satisfy such judgment in full and shall pay the Litigation Costs that are assessed against the
Indemnified Party by the court.

              (iii) If the Indemnifying Party fails, or refuses pursuant to Section 7.4(b)(i)(C) above, to
timely assume and conduct the defense of a Third-Party Claim, the Indemnified Party shall have the
right to assume and conduct the defense of such Third-Party Claim with counsel selected by it; in
which event (A) the Indemnified Party shall have the right to control the defense or settlement of
such Third-Party Claim in a manner deemed advisable by the Indemnified Party in its sole
discretion, without the consent of the Indemnifying Party, and (B) all of the Indemnified Party’s
decisions with respect thereto shall be deemed to be reasonable and binding against the
Indemnifying Party for all purposes under this Agreement. In the event the Indemnified Party
assumes and conducts the defense of a Third-Party Claim pursuant to this Section 7.4(b)(iii), all
Litigation Costs paid or incurred by the Indemnified Party in connection with defending such
Third-Party Claim shall be paid exclusively by the Indemnifying Party directly as and when payment
of such Litigation Costs is due, and all costs and expenses of a settlement or compromise of such
Third-Party Claim or upon rendition of a final judgment with respect thereto shall be paid
exclusively by the Indemnifying Party, and

              (iv) As used herein, the term “Litigation Costs” shall mean all reasonable actual legal costs
and attorneys’ fees paid or incurred by the Indemnified Party in defending against a Third-Party
Claim, including, without limitation, all reasonable actual attorneys’ fees and legal costs payable
to counsel for the defense of the Third-Party Claims, as well as all reasonable legal costs and
attorneys’ fees which are assessed by the court against the Indemnified Party or which the court
determines that the Indemnified Party is contractually required to pay the other party and all
reasonable legal costs and attorneys’ fees paid or incurred by the Indemnified Party in enforcing
its right to indemnification under this Article 7, including, without limitation, fees and costs
for discovery, trial preparation, trial and appeal, fees and costs of expert witnesses, travel
expense of witnesses, premiums for bonds required to obtain injunctive relief and specific
performance, premiums for appeal and supersedeas bonds, other costs of appeal and other costs of
court. The defense against, or the contesting of, the Third-Party Claim may include, without
limitation, the bringing and prosecution of (A) suits for declaratory judgment regarding the
disputed matters, (B) suits for injunctive relief, (C) counterclaims, cross-claims and third-party
claims, (D) interpleader or impleader actions, or (E)

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any other form of claim, action or defense which is advisable and proper to defend against or
contest such Third-Party Claim or should or must be asserted in connection therewith.

      7.5. Non-Exclusive Remedy; Inconsistencies. The defense and indemnification rights
and remedies granted under this Agreement to the Indemnified Party shall be deemed to be cumulative
with, and not exclusive of, any and all other rights and remedies for any breach of any
representation, warranty, covenant or agreement in this Agreement or any other agreement
contemplated by this Agreement by any Indemnifying Party which are available to an Indemnified
Party and to which it would otherwise be entitled for such breach under any applicable law,
statute, rule, regulation or ordinance.

ARTICLE 8

AGREED FAIR MARKET VALUE

      LPAS and PASEC agree that, for purposes of this Agreement, the aggregate fair market value of
the FPAS Shares and the FPAS Debt is US $5,000,000, with such aggregate fair market value being
allocated as follows: (i) an amount equal to the $4,000,000 principal amount of the FPAS Note plus
accrued interest thereon as of the date of this Agreement to the FPAS Debt; and (ii) the residual
amount to the FPAS Shares.

ARTICLE 9

EXPENSES

      Except as otherwise expressly provided in this Agreement, each Party agrees to bear all
expenses of any character incurred by such Party, including all attorneys’ fees and expenses, in
connection with this Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing, LPAS and PASEC each will bear one-half of any fee paid to any governmental entity and
any translation costs in connection with obtaining any approval of such governmental entity
required to make effective the transactions under this Agreement.

ARTICLE 10

MISCELLANEOUS

      10.1. Amendments. This Agreement may be amended, supplemented, and terminated only by
a written instrument duly executed by each Party.

      10.2. Headings. The headings in this Agreement are for convenience of reference only
and shall not affect its interpretation.

      10.3. Gender; Number; Terms. Words of gender may be read as masculine, feminine, or
neuter, as required by context. Words of number may be read as singular or plural, as required by
context. The word “include” and derivatives of that word are used in this agreement in an
illustrative sense rather than a limiting sense. The word “or” is not exclusive.

      10.4. Severability. If any provision of this Agreement is held illegal, invalid, or
unenforceable, such illegality, invalidity, or unenforceability will not affect any other provision
hereof. This Agreement shall, in such circumstances, be deemed modified to the extent necessary to
render enforceable the provisions hereof.

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      10.5. Notices. All notices, requests, demands or other communications that are
required or may be given pursuant to the terms of this Agreement shall be in writing and shall be
deemed to have been duly given: (i) on the date of delivery if personally delivered by hand, (ii)
on the third day after such notice is deposited in the United States mail, if mailed by registered
or certified mail, postage prepaid, return receipt requested, (iii) on the day after such notice is
sent by a nationally recognized overnight express courier, or (iv) by facsimile upon written
confirmation (other than the automatic confirmation that is received from the recipient’s facsimile
machine) of receipt by the recipient of such notice:

      To LPAS:

Liberty Pan American Sports, Inc.

12300 Liberty Boulevard

Englewood, CO 80112

Attn: Elizabeth M. Markowski, Esq.

Facsimile: 720-875-5858

With a copy to:

Sherman & Howard L.L.C.

633 17th Street, Suite 3000

Denver, CO 80202

Attn: Peggy Knight, Esq.

Facsimile: 303-298-0940

      To PASEC:

Pan American Sports Enterprises Company

c/o Hicks, Muse, Tate & Furst Incorporated

200 Crescent Court

Suite 1600

Dallas, TX 75201

Attn: Eric C. Neuman

Facsimile: 214-740-7221

With a copy to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attn: L. Kevin O’Mara, Jr., Esq.

Facsimile: 212-878-8375

Notice of any change in any such address and/or facsimile number shall also be given in the manner
set forth above; provided, however, that any such notice shall become effective only upon actual
receipt by the Party to whom such notice is directed. Whenever the giving of notice is required,
the giving of such notice may be waived by the Party entitled to receive such notice.

-12-

 

      10.6. Waiver. The failure of any Party to insist upon strict performance of any of
the terms or conditions of this Agreement will not constitute a waiver of any of its rights
hereunder.

      10.7. Assignment. No Party may assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of the other Party.

      10.8. Successors and Assigns. This Agreement binds, inures to the benefit of, and is
enforceable by the successors and assigns of the Parties.

      10.9. Governing Law.

      (a) This Agreement shall be construed and enforced in accordance with the law of the State of
New York, without regard to its conflicts of laws rules.

      (b) Each of the Parties agrees that any action or proceeding commenced to enforce any right
under this Agreement, or that is in any way related to this Agreement, shall be commenced only in
the courts of the State of New York located in New York County, or of the U.S. District Court for
the Southern District of New York (collectively, the “New York Courts”). Each of the Parties
irrevocably submits to the jurisdiction of those courts and waives, to the fullest extent
permitted by law, the right to commence any such action in any other court or venue and any
objection which it may now or hereafter have to laying of the venue of any such suit, action or
proceeding brought in any such courts and any claim that any such suit, action or proceeding
brought in such courts has been brought in an inconvenient forum, and further agrees that a final
judgment in any such suit, action or proceeding brought in such court shall be conclusive and
binding upon such Party.

      10.10. Cooperation; Further Assurances. Each Party shall cooperate and deliver such
instruments and take such actions, without any additional material cost to such Party, as may be
reasonably requested by the other Party in order to carry out the provisions and purposes of this
Agreement and the transactions contemplated hereby.

      10.11. Publicity. No Party will issue any press release or public statement with
respect to the transactions contemplated by this Agreement, without the prior written consent of
the other Party (such consent not to be unreasonably conditioned, withheld or delayed), except as
may be required by applicable law, court process or by obligations pursuant to any agreement with,
or rules of, any securities exchange or quotation system on which securities of the disclosing
Party are listed or quoted. In the event that any Party shall be required to cause such a public
announcement to be made pursuant to any applicable law, court process or by obligations pursuant to
any agreement with, or rules of, any securities exchange or quotation system on which securities of
the disclosing Party are listed or quoted, such Party shall use reasonable efforts to provide the
other Party prompt notice prior to such announcement.

      10.12. Survival. The representations and warranties contained in this Agreement shall
survive the effectiveness of the transactions under this Agreement. The covenants and agreements
of the Parties contained in this Agreement to be performed in whole or in part after the
effectiveness of the transactions under this Agreement shall survive such effectiveness and shall
continue in full force and effect in accordance with their terms.

-13-

 

      10.13. No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the Parties and their successors
and permitted assigns, and they shall not be construed as conferring and are not intended to confer
any rights on any other Persons, except as provided in Article 7 with respect to Indemnified
Parties.

      10.14. Counterparts. This Agreement may be executed in any number of counterparts and
any Party may execute any such counterpart, each of which when executed and delivered shall be
deemed to be an original and all of which counterparts taken together shall constitute but one and
the same instrument. The execution of this Agreement by any Party will not become effective until
counterparts hereof have been executed by all the Parties. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any of the other
counterparts.

      10.15. Knowledge. Whenever there is a reference to this Agreement to a Party having
knowledge of an event or condition, such Party shall be deemed to have knowledge of such event or
condition only if any officer or senior management official of such Party has actual knowledge of
the facts and circumstances of such event or condition, without any duty of inquiry.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-14-

 

      IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.

	 	 	 	 	 
	 	LIBERTY PAN AMERICAN SPORTS, INC.

 	 
	 	By:  	/s/ David J. Leonard
 	 
	 	 	David J. Leonard 	 
	 	 	Senior Vice President 	 
	 
	 	PAN AMERICAN SPORTS ENTERPRISES COMPANY

 	 
	 	By:  	/s/ Eric C. Neuman
 	 
	 	Name:  	Eric C. Neuman 	 
	 	Title:  	Vice President 	 
	 

-15-

 

List of Schedules and Exhibits

to Purchase Agreement

	 	 	 
	Schedules
	 	 
	 
	 	 
	Schedule 5.2

	 	Argentina Antitrust Proceedings
	 
	 	 
	Exhibits
	 	 
	 
	 	 
	Exhibit A

	 	Form of Acknowledgment
	 
	 	 
	Exhibit B

	 	Form of Counterpart Signature Page
	 
	 	 
	Exhibit C

	 	Form of Release

 

 

Schedule 5.2

Argentina Antitrust Proceedings

1. “HICKS, MUSE, TATE & FURST, LIBERTY MEDIA INTERNATIONAL Y FOX SPORTS LATIN AMERICA LIMITED S/
INFRACCIÓN LEY 25.156”, File No. S01:0156639/2002 (folder No. 767) of the Register of the Ministry
of Economy and Production

2. “HMTF, LIBERTY Y FOX (SEÑAL “FOX SPORTS”) S/ INFRACCION LEY N° 25.156”, File No.
S01:0163979/2002 (Folder No. 779) of the Register of the Ministry of Economy and Production

 

 

EXHIBIT A

FORM OF ACKNOWLEDGMENT

ACKNOWLEDGMENT

      As of the date hereof, the undersigned is acquiring from Liberty Pan American Sports, Inc.
(“LPAS”), as successor-in-interest to Liberty Finance LLC, a Delaware limited liability company
(“Finance”), all of LPAS’s right, title and interest in and to a promissory note dated April 28,
2003 in the original principal amount of $4,000,000 (the “FPAS Debt”) issued by Fox Pan American
Sports LLC pursuant to the terms of the subordinated convertible credit agreement dated as of April
28, 2003 among FPAS, Finance, Pan American Sports Enterprises Company (“PASEC”) and 19th
Holdings Corporation (“19th Holdings”).

      With respect to the FPAS Debt, the undersigned hereby acknowledges and agrees to the terms and
provisions of that certain Subordination and Intercreditor Agreement dated as of April 28, 2003
among Finance, PASEC, 19th Holdings, FPAS, FSLA Holdings, Inc. and International Sports
Programming LLC, as Senior Lender.

      Delivery of an executed counterpart of this Acknowledgment by telefacsimile shall constitute
delivery of a manually executed counterpart of this Acknowledgment.

Dated: April ___, 2005.

	 	 	 	 	 
	 
	 	PAN AMERICAN SPORTS ENTERPRISES COMPANY
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	 
	

	 	Title:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	 
	 	Address:
	 
	 	c/o Hicks Muse Tate & Furst Incorporated

200 Crescent Court, Suite 1600

Dallas, TX 75201

 

 

EXHIBIT B

FORM OF COUNTERPART SIGNATURE PAGE

Counterpart Signature Page to

Limited Liability Company Operating Agreement

of Fox Pan American Sports LLC dated February 5, 2002,

as amended by the First Amendment thereto dated April 28, 2003 and

the Second Amendment thereto dated January 1, 2004

(as so amended, the “Operating Agreement”)

      As Transferee of the Shares formerly held by Liberty Pan American Sports, Inc., the
undersigned executes this counterpart signature page to the Operating Agreement as of April ___,
2005.

	 	 	 	 	 
	 	PAN AMERICAN SPORTS ENTERPRISES COMPANY

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

 

 

EXHIBIT C

FORM OF RELEASE

RELEASE

      This Release is made this ___day of April, 2005 by and among Liberty Pan American Sports,
Inc., a Delaware corporation (“LPAS”), Liberty Finance LLC, a Delaware limited liability company
(“Finance”), FSI SPV, Inc., a Delaware corporation, Pan American Sports Enterprises Company, a
Delaware corporation (“PASEC”), and Fox Pan American Sports LLC, a Delaware limited liability
company (“FPAS”).

RECITALS

      A. The parties to this Release are all the present and former parties to the Limited Liability
Company Operating Agreement of Fox Pan American Sports LLC dated February 5, 2002, as amended by
the First Amendment thereto dated April 28, 2003 and the Second Amendment thereto dated January 1,
2004 (the “FPAS Operating Agreement”).

      B. LPAS, which acquired 17,500,314 limited liability shares of FPAS (the “FPAS Shares”) from
Finance, intends to sell the FPAS Shares to Pan American Sports Enterprises Company, a Delaware
corporation (“PASEC”).

      C. Absent this Release, pursuant to Section 7.1 of the FPAS Operating Agreement, after the
sale of the FPAS Shares to PASEC, Finance and LPAS would continue to be bound by the provisions of
the FPAS Operating Agreement and to be jointly and severally responsible with PASEC for all of the
obligations of Finance and LPAS under the FPAS Operating Agreement.

      D. The parties to this Release desire to release Finance and LPAS from their obligations under
the FPAS Operating Agreement as set forth in this Release.

AGREEMENT

      1. Effective upon the sale of the FPAS Shares by LPAS to PASEC, regarding of whether such sale
is or remains a Permitted Transfer (as defined in the FPAS Operating Agreement), each of the
parties to this Release hereby fully, completely, permanently and unconditionally:

      (a) Releases and forever discharges LPAS and Finance from any further obligations under the
FPAS Operating Agreement, provided that, neither LPAS nor Finance shall be released from any
obligation or liability arising out of its breach of the terms of the FPAS Operating Agreement
prior to the date hereof; and

      (b) Agrees that, except as otherwise provided in Section 1(a) above, LPAS and Finance shall no
longer be bound by the FPAS Operating Agreement.

 

 

      2. This Release binds, inures to the benefit of, and is enforceable by the successors and
assigns of the parties to this Release. This Release may be amended, supplemented or terminated
only by a written instrument duly executed by each party to this Release.

      3. This Release shall be construed in accordance with and governed by the internal laws of the
State of Delaware without reference to its rules as to conflicts of law.

      4. Each party to this Release shall cooperate and deliver such instruments and take such
actions as may be reasonably requested by LPAS or Finance in order to carry out the provisions and
purposes of this Release.

      5. This Release may be executed in any number of counterparts and any party to this Release
may execute any such counterpart, each of which when executed and delivered shall be deemed to be
an original and all of which counterparts taken together shall constitute but one and the same
instrument. It shall not be necessary in making proof of this Release or any counterpart hereof to
produce or account for any of the other counterparts.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

      IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.

	 	 	 	 	 
	 	LIBERTY PAN AMERICAN SPORTS, INC.

 	 
	 	By:  	 	 
	 	 	David J. Leonard 	 
	 	 	Senior Vice President 	 
	 
	 	LIBERTY FINANCE LLC

 	 
	 	By:  	 	 
	 	 	Charles Y. Tanabe 	 
	 	 	Senior Vice President 	 
	 
	 	FSI SPV, INC.

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	PAN AMERICAN SPORTS ENTERPRISES COMPANY

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	FOX PAN AMERICAN SPORTS LLC

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:exv10w3

 

Exhibit 10.3

Life Time Fitness, Inc.

2004 Long-Term Incentive Plan

(Effective as of April 30, 2004,

and Amended February 15, 2005)

1. Purposes.

     The purposes of this Plan are to provide long-term incentives to those persons with
responsibility for the success and growth of Life Time Fitness, Inc. (the “Company”) and its
subsidiaries, divisions and affiliated businesses, to associate the interests of such persons with
those of the Company’s shareholders, to assist the Company in recruiting, retaining and motivating
a diverse group of employees, consultants, advisors and non-employee directors on a competitive
basis, and to ensure a pay-for-performance linkage for such employees and outside directors.

2. Definitions

     For purposes of this Plan:

     (a) “Affiliate” means any corporation that is a “parent corporation” or “subsidiary
corporation” of the Company, as those terms are defined in Code Sections 424(e) and 424(f), or any
successor provisions, and, for purposes other than the grant of Incentive Stock Options, any joint
venture in which the Company or such “parent corporation” or “subsidiary corporation” owns an
equity interest.

     (b) “Award” or “Awards” means a grant under this Plan in the form of Options, Stock
Appreciation Rights, Restricted Shares, Restricted Share Units, Performance Awards, or any or all
of them.

     (c) “Award Agreement” means any written or electronic agreement contract or other instrument
or document evidencing the grant of an Award, which may but is not required to be signed by a
Participant, in such form and including such terms as the Committee in its sole discretion shall
determine.

     (d) “Board” means the Board of Directors of the Company.

     (e) “Cause” means, unless otherwise defined in an Individual Agreement, (i) dishonesty or
violation of any duty owed to the Company; (ii) conviction of a felony crime; (iii) any material
act or omission involving willful malfeasance or gross negligence in the performance of duties to
the Company; (iv) willful damage to the Company’s business and/or relationships with customers or
suppliers; and, (v) failure, refusal or inability to perform duties in accordance with the
directions, policies, and practices of the Company. The Committee shall, unless otherwise provided
in an Individual Agreement with the Participant have the sole discretion to determine whether
“Cause” exists, and its determination shall be final.

     (f) “Change in Control” is defined in Section 11(b).

     (g) “Code” means the Internal Revenue Code of 1986, as amended.

     (h) “Committee” means the Compensation Committee of the Board.

 

 

     (i) “Common Stock” means the common stock, par value $.02 per share, of the Company.

     (j) “Effective Date” shall have the meaning set forth in Section 13.

     (k) “Eligible Participants” means any of the following individuals who is designated by the
Committee as eligible to receive Awards, subject to the conditions set forth in this Plan: any
officer, employee, non-employee director, consultant or advisor of the Company or its Affiliates.
The term employee does not include any individual who is not, as of the grant date of an Award,
classified by the Company or any Affiliate as an employee on its corporate books and records even
if that individual is later reclassified (by the Company, such Affiliate, any court or any
governmental or regulatory agency) as an employee as of the grant date. Except when referring to
ISOs, all references in this Plan to “employee,” “employment” or similar words shall, with respect
to consultants or advisors, refer to the consulting or advisory services provided by such
consultants or advisors to the Company and shall, with respect to Non-Employee Directors, refer to
service as a member of the Board.

     (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time
and any successor thereto.

     (m) “Fair Market Value” on any date means:

	 	(i)  	the closing price of the stock as reported for composite
transactions, if the Company’s Common Stock is then traded on a national
securities exchange;
	 
	 	(ii)  	the average of the closing representative bid and asked prices of the
Company’s Common Stock as reported on NASDAQ on the date as of which fair market
value is being determined; or
	 
	 	(iii)  	if the Common Stock of the Company is not publicly traded on the
date of grant of any Award under this Plan, the Committee shall make a good faith
attempt to determine the fair market value of a share of Common Stock using such
criteria as it shall determine, in its sole discretion, to be appropriate for
valuation.

     (n) “Individual Agreement” means an employment, consulting or similar written agreement
between a Participant and the Company or any one of its Affiliates.

     (o) “ISO” means an Option satisfying the requirements of Section 422 of the Code and
designated by the Committee as an ISO.

     (p) “Non-Employee Director” means a member of the Board who is not an employee of the Company.

     (q) “NQSO” or “Non-Qualified Stock Option” means any Option that is not designated as an ISO
or even if so designated does not qualify as an ISO on or subsequent to its grant date.

     (r) “Options” means the right to purchase shares of Common Stock at a specified price for a
specified period of time.

     (s) “Option Exercise Price” means the purchase price per share of Common Stock covered by an
Option granted pursuant to this Plan.

     (t) “Participant” means an individual who has received an Award under this Plan.

- 2 -

 

     (u) “Performance Awards” means an Award of Performance Shares or Performance Units based on
the achievement of Performance Goals during a Performance Period.

     (v) “Performance Based Exception” means the performance-based exception set forth in Code
Section 162(m)(4)(C) from the deductibility limitations of Code Section 162(m).

     (w) “Performance Goals” means the goals established by the Committee under Section 7(d).

     (x) “Performance Measures” means the criteria set out in Section 7(d) that may be used by the
Committee as the basis for a Performance Goal.

     (y) “Performance Period” means the period established by the Committee during which the
achievement of Performance Goals is assessed in order to determine whether and to what extent a
Performance Award has been earned.

     (z) “Performance Shares” means shares of Common Stock awarded to a Participant based on the
achievement of Performance Goals during a Performance Period.

     (aa) “Performance Units” means an Award denominated in shares of Common Stock, cash or a
combination thereof, as determined by the Committee, awarded to a Participant based on the
achievement of Performance Goals during a Performance Period.

     (bb) “Plan” means the Life Time Fitness, Inc. 2004 Long-Term Incentive Plan, as amended and
restated from time to time.

     (cc) “Restriction Period” means, with respect to Restricted Shares or Restricted Share Units,
the period during which any restrictions set by the Committee remain in place. Restrictions remain
in place until such time as they have lapsed under the terms and conditions of the Restricted
Shares or Restricted Share Units or as otherwise determined by the Committee.

     (dd) “Restricted Shares” means shares of Common Stock that may not be traded or sold until the
date that the restrictions on transferability imposed by the Committee with respect to such shares
have lapsed.

     (ee) “Restricted Share Units” means the right, as described in Section 7(c), to receive an
amount, payable in either cash or shares of Common Stock, equal to the value of a specified number
of shares of Common Stock.

     (ff) “Retirement” with respect to a Non-Employee Director shall mean termination from the
Board after such Non-Employee Director shall have attained at least age 70 or after such
Non-Employee Director shall have satisfied the criteria for Retirement established by the Committee
from time to time.

     (gg) “Stock Appreciation Rights” or “SARs” means the right to receive the difference between
the Fair Market Value of a share of Common Stock on the grant date and the Fair Market Value of a
share of Common Stock on the date the Stock Appreciation Right is exercised.

     (hh) “Total Disability” shall have the meaning set forth in the long-term disability program
of the Company, unless otherwise defined in an Individual Agreement.

- 3 -

 

3. Administration of this Plan.

     (a) Authority of Committee. This Plan shall be administered by the Committee, which
shall have all the powers vested in it by the terms of this Plan, such powers to include the
authority (within the limitations described herein):

	 	•  	to select the persons to be granted Awards under this Plan,
	 
	 	•  	to determine the type, size and terms of Awards to be made to each person
selected,
	 
	 	•  	to determine the time when Awards are to be made and any conditions which must be
satisfied before an Award is made,
	 
	 	•  	to establish objectives and conditions for earning Awards,
	 
	 	•  	to determine whether an Award shall be evidenced by an agreement and, if so, to
determine the terms of such agreement (which shall not be inconsistent with this
Plan) and who must sign such agreement,
	 
	 	•  	to determine whether the conditions for earning an Award have been met and
whether an Award will be paid at the end of the Performance Period,
	 
	 	•  	to determine if and when an Award may be deferred,
	 
	 	•  	to determine the guidelines and/or procedures for the payment or exercise of
Awards, and
	 
	 	•  	to determine whether an Award should qualify, regardless of its amount, as
deductible in its entirety for federal income tax purposes, including whether any
Awards granted under this Plan comply with the Performance Based Exception under
Code Section 162(m).

     (b) Interpretation of Plan. The Committee shall have full power and authority to
administer and interpret this Plan and to adopt or establish such rules, regulations, agreements,
guidelines, procedures and instruments, which are not contrary to the terms of this Plan and which,
in its opinion, may be necessary or advisable for the administration and operation of this Plan.
The Committee’s interpretations of this Plan, and all actions taken and determinations made by the
Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding on all
parties concerned, including the Company, its shareholders and any person receiving an Award under
this Plan.

     (c) Delegation of Authority. To the extent not prohibited by law, the Committee may
(i) delegate its authority and administrative powers hereunder to a subcommittee, (ii) delegate to
one or more officers of the Company its authority to grant Awards to Eligible Participants who are
not subject to Section 16(b) of the Exchange Act, (iii) allocate all or any portion of its
responsibilities and powers to any one or more of its members and, (iv) grant authority to
employees or designate employees of the Company to execute documents on behalf of the Committee or
to otherwise assist the Committee in the administration and operation of this Plan, provided that
no such delegation may be made that would cause Awards or other transactions under this Plan to
cease to be exempt from Section 16(b) of the Exchange Act or cause an Award intended to qualify for
the Performance Based Exception to case to qualify for such exception. Any such allocation or
delegation may be revoked by the Committee at any time.

- 4 -

 

     (d) Section 162(m) and Rule 16b-3 Compliance. In the case of any grants made to
insiders or Awards that are intended to qualify for the Performance Based Exception, the Committee
shall delegate its authority to a subcommittee composed solely of two or more directors who qualify
as an “independent director” within the meaning of the applicable stock exchange, as an “outside
director” within the meaning of Section 162(m) of the Code, and as a “non-employee director” within
the meaning of Rule 16b-3.

4. Eligibility.

     Awards may be granted under this Plan to Eligible Participants.

5. Shares of Common Stock Subject to this Plan.

     (a) Authorized Number of Shares. Unless otherwise authorized by the Company’s
shareholders and subject to the provisions of this Section 5 and Section 10, the maximum aggregate
number of shares of Common Stock available for issuance under this Plan shall be 3,500,000.
Subject to the provisions of this Section 5 and Section 10, the maximum number of shares of Common
Stock that may be issued pursuant to Options intended to be ISO’s shall be 3,500,000 shares.

     (b) Share Counting. The following shall apply in determining the number of shares
remaining available for grant under this Plan:

	 	(i)  	In connection with the granting of an Option or other Award (other
than a Performance Unit denominated in dollars), the number of shares of Common
Stock available for issuance under this Plan shall be reduced by the number of
shares in respect of which the Option or Award is granted or denominated;
provided, however, that, in the case of Stock Appreciation Rights granted in
tandem with Options (so that only one may be exercised with the other terminating
upon such exercise), the number of shares of Common Stock shall only be taken into
account once (and not as to both Awards) for purposes of this Section 5 and the
limitations hereunder; and provided further where a SAR is settled in shares of
Common Stock, the number of shares of Common Stock available for issuance under
this Plan shall be reduced only by the number of shares issued in such settlement.
	 
	 	(ii)  	If any Option is exercised by tendering shares of Common Stock to the
Company as full or partial payment of the exercise price, the number of shares
available for issuance under this Plan shall be increased by the number of shares
so tendered.
	 
	 	(iii)  	Whenever any outstanding Option or other Award (or portion thereof)
expires, is cancelled, is settled in cash or is otherwise terminated for any
reason without having been exercised or payment having been made in respect of the
entire Option or Award, the shares allocable to the expired, cancelled, settled or
otherwise terminated portion of the Option or Award may again be the subject of
Options or Awards granted under this Plan.
	 
	 	(iv)  	Awards granted through the assumption of, or in substitution for,
outstanding awards previously granted to individuals who become employees as a
result of a merger, consolidation, acquisition or other corporate transaction
involving the Company as a result of an acquisition will not count against the
reserve of available shares under this Plan. The terms and conditions of the
substitute or assumed Awards may vary from the terms and conditions set forth in
this Plan to the extent the Committee at the time of the grant may deem
appropriate to conform, in whole

- 5 -

 

     or in part, to the provisions of the Awards in substitution for which they are
granted.

     (c) Shares to be Delivered. Shares of Common Stock to be delivered by the Company
under this Plan shall be determined by the Committee and may consist in whole or in part of
authorized but unissued shares or shares acquired on the open market.

     (d) Fractional Shares. No fractional shares of Common Stock may be issued under this
Plan; however, cash shall be paid in lieu of any fractional shares in settlement of an Award.

6. Award Limitations.

     The maximum number of Options, SARs and Restricted Shares that can be granted to any Eligible
Participant during a single calendar year cannot exceed 750,000. The maximum per Eligible
Participant, per calendar year amount of Awards other than Options, SARs and Restricted Shares
shall not exceed two (2) times the Eligible Participant’s base salary. The maximum Award that may
be granted to any Eligible Participant for a Performance Period greater than one year shall not
exceed the foregoing annual maximum multiplied by the number of full years in the Performance
Period.

7. Awards to Eligible Participants.

     (a) Options.

	 	(i)  	Grants. Subject to the terms and provisions of this Plan,
Options may be granted to Eligible Participants. Options may consist of ISOs or
NQSOs, as the Committee shall determine. Options may be granted alone or in tandem
with SARs. With respect to Options granted in tandem with SARs, the exercise of
either such Options or such SARs will result in the simultaneous cancellation of
the same number of tandem SARs or Options, as the case may be. The grant of an
Option shall occur on the date the Committee by resolution selects a Participant
to receive a grant of an Option, determines the number of shares of Common Stock
to be subject to such Option to be granted to such Participant and specifies the
terms and provisions of the Option. The Company shall notify a Participant of any
grant of an Option, and such Award shall be confirmed by, and subject to the terms
of, an Award Agreement.
	 
	 	(ii)  	Option Exercise Price. The Option Exercise Price shall be
equal to or greater than the Fair Market Value on the date the Option is granted,
unless the Option was granted through the assumption of, or in substitution for,
outstanding awards previously granted to individuals who became employees of the
Company or any Affiliate as a result of a merger, consolidation, acquisition or
other corporate transaction involving the Company or such Affiliate.
	 
	 	(iii)  	ISO Limits. ISOs may only be granted to employees of the
Company and its Affiliates and may only be granted to an employee who, at the time
the Option is granted, does not own stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or any
Affiliate. The aggregate Fair Market Value of all shares with respect to which
ISOs are exercisable by a Participant for the first time during any year shall not
exceed $100,000; provided, however, that any Options or portions thereof that
exceed such limit shall be treated as NQSOs notwithstanding any other provisions
of the Award

- 6 -

 

	 	 	Agreement, but only to the extent of such excess. The aggregate Fair Market Value of
such shares shall be determined at the time the Option is granted.

	 	(iv)  	No Repricing. Except for adjustments made pursuant to
Section 10, the Option Exercise Price for any outstanding Option granted under
this Plan may not be decreased after the date of grant nor may any outstanding
Option granted under this Plan be surrendered to the Company as consideration for
the grant of a new Option with a lower Option Exercise Price or otherwise be
subject to any action that would be treated, for accounting purposes, as a
“repricing” of such Option without the approval of the Company’s shareholders.
	 
	 	(v)  	Buy Out of Option Gains. In the event of a Change of
Control, the Committee shall have the right to elect, in its sole discretion and
without the consent of the holder thereof, to cancel such Option and to cause the
Company to pay to the Participant the excess of the Fair Market Value of the
 shares of Common Stock covered by such Option over the Option Exercise Price of
such Option at the date the Committee provides written notice (the “Buy Out
Notice”) of its intention to exercise such right. Buyouts pursuant to this
provision shall be effected by the Company as promptly as possible after the date
of the Buy Out Notice. Payments of buy out amounts may be made in cash, in shares
of Common Stock, or partly in cash and partly in Common Stock, as the Committee
deems advisable. To the extent payment is made in shares of Common Stock, the
number of shares shall be determined by dividing the amount of the payment to be
made by the Fair Market Value of a share of Common Stock at the date of the Buy
Out Notice. Notwithstanding the foregoing, the Committee shall have the right to
elect, in its sole discretion and without the consent of the holder thereof, to
cancel vested but unexercised Options and to cause the Company to pay to the
Participant the excess of the Fair Market Value of the shares of Common Stock
covered by such Options over the Option Exercise Price of such Options at the date
the Committee provides the Buy Out Notice, so long as the Committee takes such
action with respect to all vested but unexercised Options outstanding at the time
the Committee elects to exercises such right.

     (b) Stock Appreciation Rights.

	 	(i)  	Grants. Subject to the terms and provisions of this Plan,
SARs may be granted to Eligible Participants. SARs may be granted alone or in
tandem with Options. With respect to SARs granted in tandem with Options, the
exercise of either such Options or such SARs will result in the simultaneous
cancellation of the same number of tandem SARs or Options, as the case may be.
	 
	 	(ii)  	Purchase Price. The purchase price per share of Common Stock
covered by a SAR granted pursuant to this Plan shall be equal to or greater than
Fair Market Value on the date the SAR is granted, unless the SAR was granted
through the assumption of, or in substitution for, outstanding awards previously
granted to individuals who became employees of the Company of any Affiliate as a
result of a merger, consolidation, acquisition or other corporate transaction
involving the Company or such Affiliate.
	 
	 	(iii)  	Form of Payment. The Committee may authorize payment of a
SAR in the form of cash, Common Stock valued at its Fair Market Value on the date
of the exercise, a combination thereof, or by any other method as the Committee
may determine.

- 7 -

 

	 	(iv)  	No Repricing. Except for adjustments pursuant to Section 10,
in no event may any Stock Appreciation Right granted under this Plan be amended to
decrease the purchase price per share of Common Stock covered thereby, cancelled
in conjunction with the grant of any new Stock Appreciation Right with a lower
purchase price per share, or otherwise be subject to any action that would be
treated, for accounting purposes, as a “repricing” of such Stock Appreciation
Right, without the approval of the Company’s shareholders.

     (c) Restricted Shares / Restricted Share Units.

	 	(i)  	Grants. Subject to the terms and provisions of this Plan,
Restricted Shares or Restricted Share Units may be granted to Eligible
Participants.
	 
	 	(ii)  	Restrictions. The Committee shall impose such terms,
conditions and/or restrictions on any Restricted Shares or Restricted Share Units
granted pursuant to this Plan as it may deem advisable including, without
limitation: a requirement that Participants pay a stipulated purchase price for
each Restricted Share or each Restricted Share Unit; restrictions based upon the
achievement of specific performance goals (Company-wide, divisional, and/or
individual); time-based restrictions on vesting; and/or restrictions under
applicable Federal or state securities laws. Unless otherwise determined by the
Committee at the time of grant, any time-based restriction period shall be for a
minimum of three years. To the extent the Restricted Shares or Restricted Share
Units are intended to be deductible under Code Section 162(m), the applicable
restrictions shall be based on the achievement of Performance Goals over a
Performance Period, as described in Section 7(d) below.
	 
	 	(iii)  	Payment of Units. Restricted Share Units that become
payable in accordance with their terms and conditions shall be settled in cash,
shares of Common Stock, or a combination of cash and shares, as determined by the
Committee.
	 
	 	(iv)  	No Disposition During Restriction Period. During the
Restriction Period, Restricted Shares may not be sold, assigned, transferred or
otherwise disposed of, or mortgaged, pledged or otherwise encumbered. In order to
enforce the limitations imposed upon the Restricted Shares, the Committee may (a)
cause a legend or legends to be placed on any certificates relating to such
Restricted Shares, and/or (b) issue “stop transfer” instructions, to its transfer
agent as it deems necessary or appropriate.
	 
	 	(v)  	Dividend and Voting Rights. Unless otherwise determined by
the Committee, during the Restriction Period, Participants who hold Restricted
Shares and Restricted Share Units shall have the right to receive dividends in
cash or other property or other distribution or rights in respect of such shares,
and Participants who hold Restricted Shares shall have the right to vote such
shares as the record owner thereof. Unless otherwise determined by the Committee,
any dividends payable to a Participant during the Restriction Period shall be
distributed to the Participant only if and when the restrictions imposed on the
applicable Restricted Shares or Restricted Share Units lapse.
	 
	 	(vi)  	Share Certificates. Each certificate issued for Restricted
Shares shall be registered in the name of the Participant and deposited with the
Company or its designee. At the end of the Restriction Period, a certificate
representing the number of shares to

- 8 -

 

	 	 	which the Participant is then entitled shall be delivered to the Participant free and
clear of the restrictions. No certificate shall be issued with respect to a
Restricted Share Unit unless and until such unit is paid in shares of Common Stock.

     (d) Performance Awards.

	 	(i)  	Grants. Subject to the provisions of this Plan, Performance
Awards consisting of Performance Shares or Performance Units may be granted to
Eligible Participants. Performance Awards may be granted either alone or in
addition to other Awards made under this Plan.
	 
	 	(ii)  	Performance Goals. Unless otherwise determined by the
Committee, Performance Awards shall be conditioned on the achievement of
Performance Goals (which shall be based on one or more Performance Measures, as
determined by the Committee) over a Performance Period. The Performance Period
shall be one year, unless otherwise determined by the Committee.
	 
	 	(iii)  	Performance Measures. The Performance Measure(s) to be used
for purposes of Performance Awards may be described in terms of objectives that
are related to the individual Participant or objectives that are Company-wide or
related to a subsidiary, division, department, region, function, business unit or
Affiliate of the Company in which the Participant is employed, and may consist of
one or more or any combination of the following criteria: stock price, market
share, sales revenue, cash flow, sales volume, earnings per share, EBITDA, pre-tax
income, return on equity, return on assets, return on sales, return on invested
capital, economic value added, net earnings, total shareholder return, gross
margin, and/or costs. The Performance Goals based on these Performance Measures
may be made relative to the performance of other corporations. The Performance
Measures to be used for Performance Awards that are not intended to satisfy the
conditions for the Performance Based Exception under Code Section 162(m) may
consist of other criteria determined by the Committee.
	 
	 	(iv)  	Extraordinary Events. At, or at any time after, the time an
Award is granted, and to the extent permitted under Code Section 162(m) and the
regulations thereunder without adversely affecting the treatment of the Award
under the Performance Based Exception, the Committee may provide for the manner in
which performance will be measured against the Performance Goals (or may adjust
the Performance Goals) to reflect the impact of specific corporate transactions,
accounting or tax law changes and other extraordinary and nonrecurring events.
	 
	 	(v)  	Interpretation. With respect to any Award that is intended
to satisfy the conditions for the Performance Based Exception under Code Section
162(m): (A) the Committee shall interpret this Plan and this Section 7 in light of
Code Section 162(m) and the regulations thereunder; (B) the Committee shall have
no discretion to amend the Award in any way that would adversely affect the
treatment of the Award under Code Section 162(m) and the regulations thereunder;
and (C) such Award shall not be paid until the Committee shall first have
certified that the Performance Goals have been achieved.

     (e) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Eligible Participants, subject to the terms of this Plan, such other
Awards that are denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, shares of

- 9 -

 

Common Stock (including, without limitation, securities convertible into shares of Common
Stock), as are deemed by the Committee to be consistent with the purpose of this Plan. Shares of
Common Stock or other securities delivered pursuant to a purchase right granted under this Section
7(e) shall be purchased for such consideration, which may be paid by such method or methods and in
such form or forms (including, without limitation, cash, shares of Common Stock, other securities,
other Awards or other property or any combination thereof), as the Committee shall determine, the
value of which consideration, as established by the Committee, shall not be less than 100% of the
Fair Market Value of such shares of Common Stock or other securities as of the date such purchase
right is granted, unless otherwise determined by the Committee.

     (f) Dividend Equivalents. The Committee is hereby authorized to grant dividend
equivalents to Eligible Participants under which the Participant shall be entitled to receive
payments (in cash, shares of Common Stock, other securities, other Awards or other property as
determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by
the Company to holders of shares of Common Stock with respect to a number of shares of Common Stock
determined by the Committee. Subject to the terms of this Plan, such dividend equivalents may have
such terms and conditions as the Committee shall determine.

     (g) Termination of Awards. Unless otherwise provided in an Award Agreement, Awards
shall terminate in accordance with this Section 7(g).

	 	(i)  	Options and SARs Granted to Eligible Participants. Each
Option and SAR granted to an Eligible Participant pursuant to this Section 7 shall
terminate:

If the Participant is then living, at the earliest of the following times:

	 	(A)  	ten (10) years after the date of grant of the Option or SAR,
except in the event of death or Total Disability as provided below;
	 
	 	(B)  	ninety (90) days after termination of employment with the Company
or any Affiliate other than termination because of death or Total Disability or
through discharge for Cause; provided, however, that if any Option or SAR is not
fully exercisable at the time of such termination of employment, such Option or
SAR shall expire on the date of such termination of employment to the extent not
then exercisable;
	 
	 	(C)  	immediately upon termination of Participant’s employment through
discharge for Cause; or
	 
	 	(D)  	any other time set forth in the Award Agreement describing and
setting the terms of the Award.
	 
	 	   	In the event of death or Total Disability of the Participant while employed by
the Company or any Affiliate, or if no longer so employed such Participant dies
prior to termination of the entire Option or SAR under Section 7(g)(i)(B) or
(D) hereof, the Participant’s Option or SAR shall become exercisable in full on
the date of such death or Total Disability and shall remain exercisable for a
minimum period of one (1) year after the date of death or Total Disability,
unless it terminates earlier pursuant to Section 7(g)(i)(A) or (D). To the
extent an Option or SAR is exercisable after the death of the Participant, it
may be exercised by the person or persons to whom the Participant’s rights
under the agreement have passed by will or by the applicable laws of descent
and distribution and to the extent an Option or

- 10 -

 

	 	   	SAR is exercisable after the Total Disability of the Participant who is
incompetent, it may be exercised by the Participant’s legal representative.

	 	(ii)  	Restricted Shares and Restricted Share Units. Unless
otherwise provided in the related Award Agreement, in the case of a Participant’s
death or Total Disability, the Participant shall be entitled to receive a number
of shares of Common Stock under outstanding Restricted Shares, or in the case of
Restricted Share Units, an amount of cash or number of shares of Common Stock,
that has been prorated for the portion of the term of the Award during which the
Participant was employed by the Company or any Affiliate, and, with respect to any
shares, all restrictions shall lapse. Any Restricted Shares or Restricted Share
Units as to which the restrictions do not lapse under the preceding sentence shall
terminate at the date of the Participant’s termination of employment and such
Restricted Shares or Restricted Share Units shall be forfeited to the Company;
provided, however, that Awards of Restricted Shares or Restricted Share Units
subject to Performance Measures shall be treated the same as Performance Awards
according to Section 7(g)(iii).
	 
	 	(iii)  	Performance Awards. If a Participant’s employment or other
relationship with the Company or any Affiliate terminates during a Performance
Period applicable to a Performance Award because of death or Total Disability, or
under other circumstances provided by the Committee in its discretion in the
related Award Agreement or otherwise, the Participant, unless the Committee shall
otherwise provide in the Award Agreement, shall be entitled to a payment with
respect to such Performance Awards at the end of the Performance Period based upon
the extent to which achievement of the Performance Measures was satisfied at the
end of such period (as determined at the end of the Performance Period) and
prorated for the portion of the Performance Period during which the Participant
was employed by the Company or any Affiliate. Except as provided in this
paragraph, if a Participant’s employment with the Company or any Affiliate
terminates during a Performance Period, then such Participant shall not be
entitled to any payment with respect to that Performance Award.

	8.  	Awards to Non-Employee Directors.

     (a) Awards. Non-Employee Directors are eligible to receive any and all types of
Awards under this Plan other than ISOs. The Board must approve all Awards to Non-Employee
Directors. Any Award to a Non-Employee Director shall be subject to the terms of Section 7 of this
Plan, provided that to the extent the provisions of this Section 8 conflict with the terms of
Section 7, this Section 8 shall prevail with respect to Awards to Non-Employee Directors.

     (b) Death, Total Disability and Retirement. In the event of the death, Total
Disability or Retirement of a Non-Employee Director prior to the granting of an Award in respect of
the fiscal year in which such event occurred, an Award may, in the discretion of the Board, be
granted in respect of such fiscal year to the retired or disabled Non-Employee Director or his or
her estate. If any Non-Employee Director ceases to be a member of the Board for any reason other
than death, Total Disability or Retirement prior to the granting of an Award in respect of the
fiscal year in which such event occurred, his or her rights to any Award in respect of the fiscal
year during which such cessation occurred will terminate unless the Board determines otherwise.

- 11 -

 

     (c) Terms of Awards Granted to Non-Employee Directors.

	 	(i)  	Each Option granted to a Non-Employee Director shall have an Option
Exercise Price equal to the Fair Market Value on the grant date.
	 
	 	(ii)  	Each Option granted to a Non-Employee Director shall vest in
accordance with the terms of an Award Agreement and shall have a term of ten
years.
	 
	 	(iii)  	In the event a Non-Employee Director terminates membership on the
Board prior to the vesting date, or lapsing of any restrictions, of an Award, then
(A) if such termination is the result of such Non-Employee Director’s death, Total
Disability or Retirement, such Award shall immediately vest or, as applicable, the
restrictions shall lapse, and, in the case of Options, be exercisable, and (B) if
such termination is the result of an event other than death, Total Disability or
Retirement, such Award shall immediately terminate and expire.
	 
	 	(iv)  	No Options granted to a Non-Employee Director may be exercised after
he or she ceases to be a member of the Board, except that: (A) if such cessation
occurs by reason of death, the Options then held by the Non-Employee Director may
be exercised by his or her designated beneficiary (or, if none, his or her legal
representative) until the expiration of such Options in accordance with the terms
hereof; (B) if such cessation occurs by reason of the Non-Employee Director
incurring a Total Disability, the Options then held by the Non-Employee Director
may be exercised by him or her until the expiration of such Options in accordance
with its terms; and (C) if such cessation occurs by reason of the Non-Employee
Director’s Retirement, the Options then held by the Non-Employee Director may be
exercised by him or her until the expiration of such Options in accordance with
the terms hereof.

     (d) Exercise of Options Granted to Non-Employee Directors.

	 	(i)  	To exercise an Option, a Non-Employee Director must provide to the
Company (A) a written notice specifying the number of Options to be exercised and
(B) to the extent applicable, any required payments due upon exercise.
	 
	 	(ii)  	Non-Employee Directors may exercise Options under either of the
following methods:

	 	(A)  	Cashless Exercise. To the extent permitted by law, Non-Employee
Directors may exercise Options through a registered broker-dealer pursuant to
cashless exercise procedures that are, from time to time, approved by the
Committee. Proceeds from any such exercise shall be used to pay the exercise
costs, which include the Option Exercise Price, applicable taxes and brokerage
commissions. Any remaining proceeds from the sale shall be delivered to the
Non-Employee Director in cash or stock, as specified by the Non-Employee
Director.
	 
	 	(B)  	Standard Exercise. Non-Employee Directors may exercise Options by
paying to the Company an amount in cash from his or her own funds equal to the
Option Exercise Price and any taxes required at exercise. A certificate
representing the shares of Common Stock that the Non-Employee Director purchased
shall be delivered to him or her only after the Option Exercise Price and the
applicable taxes have been paid.

- 12 -

 

	9.  	Deferred Payments.

     Subject to the terms of this Plan, the Committee may determine that all or a portion of any
Award to a Participant, whether it is to be paid in cash, shares of Common Stock or a combination
thereof, shall be deferred or may, in its sole discretion, approve deferral elections made by
Participants. Deferrals shall be for such periods and upon such terms as the Committee may
determine in its sole discretion.

	10.  	Dilution and Other Adjustments.

     In the event of any merger, reorganization, consolidation, recapitalization, stock dividend,
stock split, combination or exchange of shares or other change in corporate structure affecting any
class of Common Stock, the Committee may, but shall not be required to, make such adjustments in
the class and aggregate number of shares which may be delivered under this Plan as described in
Section 5, the individual award maximums under Section 6, the class, number, and Option Exercise
Price of outstanding Options and the class and number of shares subject to any other Awards granted
under this Plan (provided the number of shares of any class subject to any Award shall always be a
whole number), as may be determined to be appropriate by the Committee, and any such adjustment
may, in the sole discretion of the Committee, take the form of Options covering more than one class
of Common Stock. Such adjustment shall be conclusive and binding for all purposes of this Plan.

	11.  	Change in Control.

     (a) Impact of Change in Control. Notwithstanding any other provision of this Plan to
the contrary, unless otherwise provided by the Committee in any Award Agreement, in the event of a
Change in Control:

	 	(i)  	Any Options and SARs outstanding as of the date of such Change in
Control, and which are not then exercisable and vested, shall become fully
exercisable and vested.
	 
	 	(ii)  	The restrictions and deferral limitations applicable to any
Restricted Shares and Restricted Share Units shall lapse, and such Restricted
Shares and Restricted Share Units shall become free of all restrictions and become
fully vested.
	 
	 	(iii)  	All Performance Awards shall be considered to be earned and payable
in full, and any deferral or other restriction shall lapse and such Performance
Awards shall be settled in cash or shares of Common Stock, as determined by the
Committee, as promptly as is practicable.
	 
	 	(iv)  	All restrictions on other Awards shall lapse and such Awards shall
become free of all restrictions and become fully vested.

     (b) Definition. “Change in Control” means (i) a change in the composition of the
Board such that the individuals who, as of the Effective Date (as defined below), constitute the
Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided, however, for purposes of this
definition, that any individual who becomes a member of the Board subsequent to the Effective Date,
whose election, or nomination for election by the Company’s shareholders, was approved by a vote of
at least a majority of those individuals who are members of the Board and who were also members of
the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but, provided, further, that any

- 13 -

 

such individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other than the Board
shall not be so considered as a member of the Incumbent Board; (ii) consummation of a merger,
tender offer or consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 45% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) consummation of a sale of all or substantially all of the assets of the
Company, other than in connection with the sale-leaseback of the Company’s real estate.

	12.  	Miscellaneous Provisions.

     (a) Misconduct. Except as otherwise provided in agreements covering Awards hereunder,
a Participant shall forfeit all rights in his or her outstanding Awards under this Plan, whether or
not such Awards have been earned or are vested or remain unearned or unvested, and all such
outstanding Awards shall automatically terminate and lapse, if the Committee determines that such
Participant has (i) used for profit or disclosed to unauthorized persons, confidential information
or trade secrets of the Company, (ii) breached any contract with or violated any fiduciary
obligation to the Company, including, without limitation, a violation of any Company code of
conduct, (iii) engaged in unlawful trading in the securities of the Company or of another company
based on information gained as a result of that Participant’s employment or other relationship with
the Company, or (iv) committed a felony or other serious crime.

     (b) Rights as Shareholder. Except as otherwise provided herein, a Participant shall
have no rights as a holder of Common Stock with respect to Awards hereunder, unless and until
certificates for shares of Common Stock are issued to the Participant.

     (c) No Loans. No loans from the Company to Participants shall be permitted under this
Plan.

     (d) Assignment or Transfer. Unless the Committee shall specifically determine
otherwise, no Award under this Plan or any rights or interests therein shall be transferable other
than by will or the laws of descent and distribution and shall be exercisable, during the
Participant’s lifetime, only by the Participant. Once awarded, the shares of Common Stock received
by Participants may be freely transferred, assigned, pledged or otherwise subjected to lien,
subject to the restrictions imposed by the Securities Act of 1933, Section 16 of the Exchange Act
and the Company’s policy concerning insider trading, each as amended from time to time.

     (e) Withholding Taxes. The Company shall have the right to deduct from all Awards
paid in cash (and any other payment hereunder) any federal, state, local or foreign taxes required
by law to be withheld with respect to such Awards and, with respect to Awards paid in stock or upon
exercise of Options, to require the payment (through withholding from the Participant’s salary or
otherwise) of any such taxes. The obligations of the Company to make delivery of Awards in cash or
Common Stock shall be subject to currency or other restrictions imposed by any government.

     (f) No Rights to Awards. Neither this Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of the Company or any of
its subsidiaries, divisions or Affiliates. Except as set forth herein, no employee or other person
shall have any claim or right to be granted an Award under this Plan. By accepting an Award, the

- 14 -

 

Participant acknowledges and agrees that (i) that the Award will be exclusively governed by
the terms of this Plan, including the right reserved by the Company to amend or cancel this Plan at
any time without the Company incurring liability to the Participant (except for Awards already
granted under this Plan), (ii) Awards are not a constituent part of salary and that the Participant
is not entitled, under the terms and conditions of employment, or by accepting or being granted
Awards under this Plan to require Awards to be granted to him or her in the future under this Plan,
or any other plan, (iii) the value of Awards received under this Plan will be excluded from the
calculation of termination indemnities or other severance payments, and (iv) the Participant will
seek all necessary approval under, make all required notifications under and comply with all laws,
rules and regulations applicable to the ownership of Options and stock and the exercise of Options,
including, without limitation, currency and exchange laws, rules and regulations.

     (g) Beneficiary Designation. To the extent allowed by the Committee, each Participant
under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named on
a contingent or successive basis) to whom any benefit under this Plan is to be paid in case of his
or her death before he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, and unless the Committee determines
otherwise shall be in a form prescribed by the Committee, and will be effective only when filed by
the Participant in writing with the Company during the Participant’s lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the
Participant’s estate.

     (h) Costs and Expenses. The cost and expenses of administering this Plan shall be
borne by the Company and not charged to any Award or to any Participant.

     (i) Fractional Shares. Fractional shares of Common Stock shall not be issued or
transferred under an Award, but the Committee may pay cash in lieu of a fraction or round the
fraction, in its discretion.

     (j) Funding of Plan. The Company shall not be required to establish or fund any
special or separate account or to make any other segregation of assets to assure the payment of any
Award under this Plan.

     (k) Indemnification. Provisions for the indemnification of officers and directors of
the Company in connection with the administration of this Plan shall be as set forth in the
Company’s articles of incorporation and bylaws as in effect from time to time.

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

     (m) Section 16 Compliance; Section 162(m) Administration. This Plan is intended to
comply in all respects with Rule 16b-3 or any successor provision, as in effect from time to time,
and in all events this Plan shall be construed in accordance with the requirements of Rule 16b-3.
If any Plan provision does not comply with Rule 16b-3 as hereafter amended or interpreted, the
provision shall be deemed inoperative. The Board, in its absolute discretion, may bifurcate this
Plan so as to restrict, limit or condition the use of any provision of this Plan with respect to
persons who are officers or directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning this Plan with respect to other Eligible Participants. The
Company intends that all Awards granted under this Plan to individuals who are or who the

- 15 -

 

Committee believes will be “covered employees” (within the meaning of Section 162(m)(3) of the
Code) will qualify for the Performance Based Exception.

	13.  	Effective Date, Governing Law, Amendments and Termination.

     (a) Effective Date. This Plan shall be effective as of April 30, 2004 (the “Effective
Date”), provided that it is approved by the shareholders of the Company in accordance with all
applicable laws, regulations and stock exchange rules and listing standards.

     (b) Amendments. The Board may at any time terminate or from time to time amend this
Plan in whole or in part, but no such action shall adversely affect any rights or obligations with
respect to any Awards granted prior to the date of such termination or amendment. Notwithstanding
the foregoing, unless the Company’s shareholders shall have first approved the amendment, no
amendment of this Plan shall be effective which would (i) increase the maximum number of shares of
Common Stock which may be delivered under this Plan or to any one individual (except to the extent
such amendment is made pursuant to Section 10 hereof), (ii) extend the maximum period during which
Awards may be granted under this Plan, (iii) add to the types of awards that can be made under this
Plan, (iv) change the Performance Measures pursuant to which Performance Awards are earned, (v)
modify the requirements as to eligibility for participation in this Plan, or (vi) require
shareholder approval pursuant to this Plan, applicable law or applicable stock exchange standards,
to be effective. With the consent of the Participant affected, the Committee may amend outstanding
agreements evidencing Awards under this Plan in a manner not inconsistent with the terms of this
Plan.

     (c) Governing Law. All questions pertaining to the construction, interpretation,
regulation, validity and effect of the provisions of this Plan shall be determined in accordance
with the laws of the State of Minnesota without giving effect to conflict of laws principles.

     (d) Termination. No Awards shall be made under this Plan after the tenth anniversary
of the Effective Date.

- 16 -

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