Document:

Exhibit 10.1

 

J.L. HALSEY CORPORATION

2005 EQUITY-BASED COMPENSATION PLAN

 

RESTRICTED STOCK AWARD AGREEMENT

 

To: 
Nicholas DeSantis Cuadra Date of Grant:  October 11, 2005 Number of
Shares:  120,968

 

J.L.
Halsey Corporation, a Delaware corporation (the “Company”), is pleased to grant
you an award (the “Plan Award”) consisting of an aggregate of 120,968 shares
(the “Restricted Shares”) of the Company’s authorized common stock, par value
$.01 per share (“Stock”), subject to the terms and conditions set forth in this
Restricted Stock Award Agreement (this “Award Agreement”) and the J.L. Halsey
Corporation 2005 Equity-Based Compensation Plan (the “Plan”).  The Plan Award is governed by the terms of
this Award Agreement and, where appropriate, the Plan.  Any capitalized terms not defined herein
shall have the meaning set forth in the Plan.

 

This
Award Agreement sets forth the terms of the agreement between you and the
Company with respect to the Restricted Shares. 
By accepting this Award Agreement, you agree to be bound by all of the
terms hereof.

 

1.             Definitions.  As used in this Award Agreement, the
following terms have the meanings set forth below:

 

(a)           “Board” means the Company’s
Board of Directors.

 

(b)           “Business Day” means any day
other than a Saturday, a Sunday or a day on which banking institutions in the
State of Texas are authorized or obligated by law or executive order to close.

 

(c)           “Committee” means the committee
designated by the Board to administer the Plan.

 

(d)           “Date of Grant” means the date
set forth above.

 

2.             Escrow of
Restricted Shares.  The Company
shall issue in your name a certificate or certificates representing the
Restricted Shares and retain that certificate or those certificates until your
service as a member of the Board terminates or the Restricted Shares are
forfeited as contemplated in Sections 4 and 7 of this Award Agreement.  You shall execute one or more stock powers in
blank for those certificates and deliver those stock powers to the Company.  You hereby agree that the Company shall hold
the certificate or certificates representing the Restricted Shares and the
related stock powers pursuant to the terms of this Award Agreement until such
time as such certificate or certificates are either delivered to you or
canceled pursuant to this Agreement.

 

3.             Ownership of
Restricted Shares.  From and
after the time that the Restricted Shares have been issued in your name, you
will be entitled to all the rights of absolute ownership

 

 

of the Restricted Shares,
including the right to vote those shares and to receive dividends thereon if,
as, and when declared by the Board, subject, however, to the terms, conditions
and restrictions set forth in this Agreement.

 

4.             Restrictions;
Forfeiture.  The Restricted
Shares are restricted in that they may not be sold, transferred or otherwise
alienated or hypothecated until such restrictions are removed or expire as
described in Section 5 or 7 of this Agreement.  The Restricted Shares are also restricted in
the sense that they may be forfeited to the Company.  You hereby agree that if the Restricted
Shares are forfeited, as provided in Section 7, the Company shall have the
right to deliver the certificate(s) representing the Restricted Shares to the
Company’s transfer agent for cancellation or, at the Company’s election, for
transfer to the Company to be held by the Company in treasury or by any
designee of the Company.

 

5.             Expiration of
Restrictions and Risk of Forfeiture. 
The restrictions on all of the Restricted Shares granted pursuant to
this Award Agreement will expire and the Restricted Shares will become
transferable and nonforfeitable according to the schedule set forth in
this Section 5, provided, however, that such restrictions will expire on
such dates only if you have been a member of the Board continuously from the
Date of Grant through the applicable vesting date.

 

	
  On or After Each of the Following

  Vesting Dates

  	
   

  	
  Cumulative Percentage of Shares as to

  Which the Restricted Shares are

  Transferable and Nonforfeitable

  	
   

  
	
  January 11, 2006

  	
   

  	
  8.33

  	
  %

  
	
  April 11, 2006

  	
   

  	
  16.67

  	
  %

  
	
  July 11, 2006

  	
   

  	
  25.00

  	
  %

  
	
  October 11, 2006

  	
   

  	
  33.33

  	
  %

  
	
  January 11, 2007

  	
   

  	
  41.67

  	
  %

  
	
  April 11, 2007

  	
   

  	
  50.00

  	
  %

  
	
  July 11, 2007

  	
   

  	
  58.33

  	
  %

  
	
  October 11, 2007

  	
   

  	
  66.67

  	
  %

  
	
  January 11, 2008

  	
   

  	
  75.00

  	
  %

  
	
  April 11, 2008

  	
   

  	
  83.33

  	
  %

  
	
  July 11, 2008

  	
   

  	
  91.67

  	
  %

  
	
  October 11, 2008

  	
   

  	
  100.00

  	
  %

  

 

6.             Adjustment
Provisions.  In the event there
is any change in the outstanding Stock of the Company by reason of any
reorganization, recapitalization, stock split, stock dividend, combination of
shares or otherwise, there shall be substituted for or added to each

 

2

 

share of Stock theretofore
appropriated or thereafter subject, or which may become subject, to this Plan
Award, the number and kind of shares of stock or other securities into which
each outstanding share of Stock shall be so changed or for which each such
share shall be exchanged, or to which each such share shall be entitled, as the
case may be.  Adjustment under the
preceding provisions of this Section 6 will be made by the Committee,
whose determination as to what adjustments will be made and the extent thereof
will be final, binding, and conclusive. 
No fractional interest will be issued under the Plan on account of any
such adjustment.

 

7.             Termination of
Board Service.

 

(a)           Termination Other Than Due to
Death. 
If your service as a member of the Board is terminated for any reason
other than due to your death, then that portion, if any, of this Plan Award for
which restrictions have not lapsed as of the date of termination shall become
null and void; provided, however, that the portion, if any, of this Plan Award
for which restrictions have expired as of the date of such termination shall
survive such termination.

 

(b)           Death.  Upon your death, the restriction period of
the Restricted Shares shall immediately be accelerated and the restrictions
shall expire.

 

8.             Delivery of Stock.  Promptly following the termination of your
service as a member of the Board, but only to the extent the restrictions on
the Restricted Shares have expired as contemplated in Sections 5 and 7 of this
Award Agreement, the Company shall cause to be issued and delivered to you or
your designee a certificate evidencing the number of Restricted Shares as to
which restrictions have lapsed, free of any restrictive legend relating to the
lapsed restrictions; provided however, following the expiration of the
restrictions on the Restricted Shares as contemplated in Sections 5 and 7 of
this Award Agreement but prior to the termination of your service as a member
of the Board you may request the delivery of a certificate evidencing the
number of Restricted Shares as to which restrictions have lapsed, free of any
restrictive legend relating to the lapsed restrictions, which request the
Company will honor promptly.  The value
of such Restricted Shares shall not bear any interest owing to the passage of
time.

 

9.             Conditions to
Delivery of Stock and Registration. 
Nothing herein shall require the Company to issue any shares with
respect to the Plan Award if that issuance would, in the opinion of counsel for
the Company, constitute a violation of the Securities Act of 1933 or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or
securities association, as then in effect.

 

From
time to time, the Board and appropriate officers of the Company shall and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons
to make shares of Stock available for issuance.

 

10.          Furnish Information.  You agree to furnish to the Company all
information requested by the Company to enable it to comply with any reporting
or other requirement imposed upon the Company by or under any applicable
statute or regulation.

 

3

 

11.          Remedies.  The parties to this Award Agreement shall be
entitled to recover from each other reasonable attorneys’ fees incurred in
connection with the enforcement of the terms and provisions of this Award
Agreement whether by an action to enforce specific performance or for damages
for its breach or otherwise.

 

12.          Consideration.  No restriction on the Restricted Shares shall
lapse unless and until you have performed services for the Company or any of
its Subsidiaries that the Company believes is equal to or greater in value than
the par value of the Stock subject to this Plan Award.

 

13.          Continuation of
Service on the Board.  Nothing
contained in this Award Agreement shall not be construed to confer upon you any
right to continue to serve as a member of the Board.

 

14.          No Liability for Good
Faith Determinations.  The
Company and the members of the Board shall not be liable for any act, omission
or determination taken or made in good faith with respect to this Award
Agreement or the Restricted Shares granted hereunder.

 

15.          No Guarantee of
Interests.  The Board and the
Company do not guarantee the Stock of the Company from loss or depreciation.

 

16.          Company Records.  Records of the Company or its Subsidiaries
regarding your period of service on the Board, termination of service and the
reason therefore and other matters shall be conclusive for all purposes
hereunder, unless determined by the Company to be incorrect.

 

17.          Company Action.  Any action required of the Company shall be
by resolution of the Board or by a Person authorized to act by resolution of
the Board.

 

18.          Severability.  If any provision of this Award Agreement is
held to be illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining provisions hereof, but such provision shall be
fully severable and this Award Agreement shall be construed and enforced as if
the illegal or invalid provision had never been included herein.

 

19.          Arbitration.  You and the Company agree, upon written
request of either you or the Company, to the resolution by binding arbitration
of all claims, demands, causes of action, disputes, controversies or other
matters in question (“Claims”), whether or not arising out of this Award
Agreement or your service on the Board (or its termination), whether arising in
contract, tort or otherwise and whether provided by statute, equity or common
law, that the Company may have against you or that you may have against the
Company or its parents, subsidiaries or affiliates, and each of the foregoing
entities’ respective officers, directors, employees or agents in their capacity
as such or otherwise, if such Claim is not resolved by the mutual written
agreement between you and the Company, or otherwise, within 30 days after
notice of the dispute is first given. 
Claims covered by this Section 19 include without limitation claims
by you for breach of this Award Agreement, wrongful termination, discrimination
(based on age, race, sex, disability, national origin, sexual orientation, or
any other factor), harassment and retaliation. 
Any arbitration shall be conducted in accordance with the Federal
Arbitration Act (“FAA”) and, to the extent an issue is not addressed by the
FAA, with the then-current National Rules for the Resolution of Employment
Disputes of the American Arbitration Association

 

4

 

(“AAA”) or such other rules of
the AAA as are applicable to the claims asserted.  If a party refuses to honor its obligations
under this Section 19, the other party may compel arbitration in either
federal or state court.  The arbitrators
shall apply the substantive law of Delaware (excluding choice-of-law principles
that might call for the application of some other jurisdiction’s law) or
federal law, or both as applicable to the claims asserted.  The arbitrators shall have exclusive
authority to resolve any dispute relating to the interpretation, applicability
or enforceability or formation of this Award Agreement (including this Section 19),
including any claim that all or part of the Award Agreement is void or voidable
and any claim that an issue is not subject to arbitration.  The results of arbitration will be binding
and conclusive on the parties hereto. Any arbitrators’ award or finding or any
judgment or verdict thereon will be final and unappealable. All parties agree
that venue for arbitration will be in Dallas, Texas, and that any arbitration
commenced in any other venue will be transferred to Dallas, Texas, upon the
written request of any party to this Award Agreement. In the event that an
arbitration is actually conducted pursuant to this Section 19, the party
in whose favor the arbitrator renders the award shall be entitled to have and
recover from the other party all costs and expenses incurred, including
reasonable attorneys’ fees, reasonable costs and other reasonable expenses
pertaining to the arbitration and the enforcement thereof and such attorneys
fees, costs and other expenses shall become a part of any award, judgment or
verdict.  Any and all of the arbitrators’
orders, decisions and awards may be enforceable in, and judgment upon any award
rendered by the arbitrators may be confirmed and entered by any federal or
state court having jurisdiction.  All
arbitrations will have three individuals acting as arbitrators: one arbitrator
will be selected by you, one arbitrator will be selected by the Company, and
the two arbitrators so selected will select a third arbitrator; provided that (a) you
or the Company shall use reasonably diligent efforts to select its respective
arbitrator within 60 days after a matter is submitted to arbitration and (b) the
parties (including arbitrators) shall not be limited to selecting arbitrators
from only the AAA’s lists of arbitrators. 
Any arbitrator selected by a party will not be affiliated, associated or
related to the party selecting that arbitrator in any matter whatsoever.  The arbitration hearing shall be conducted
within 60 days after the selection of the arbitrators.  All privileges under state and federal law,
including attorney-client, work product and party communication privileges,
shall be preserved and protected.  The
decision of the majority of the arbitrators will be binding on all
parties.  Arbitrations will be conducted
in a manner so that the final decision of the arbitrators will be made and
provided to you and the Company no later than 120 days after a matter is
submitted to arbitration.  All proceedings
conducted pursuant to this agreement to arbitrate, including any order,
decision or award of the arbitrators, shall be kept confidential by all
parties.  YOU
ACKNOWLEDGE THAT BY SIGNING THIS AWARD AGREEMENT, YOU ARE WAIVING ANY RIGHT
THAT YOU MAY HAVE TO A JURY TRIAL OR A COURT TRIAL, OF ANY SERVICE-RELATED
CLAIM ALLEGED BY YOU.

 

20.          Notices.  Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail.  Any such notice required or
permitted to be delivered hereunder shall be deemed to be delivered on the date
on which it is personally delivered, or, whether actually received or not, on
the third Business Day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address which such person has theretofore specified by
written notice delivered in accordance herewith.  The Company or you may change, at any time
and from time to time, by written notice to the other, the address which it or
he had previously specified for receiving notices.

 

5

 

The
Company and you agree that any notices shall be given to the Company or to you
at the following addresses:

 

Company:              103 Foulk Road, Suite 205Q

Wilmington, Delaware  19803

Attention:  Corporate Secretary

 

Holder:                   At your current address as shown
in the Company’s records

 

21.          Waiver of Notice.  Any person entitled to notice hereunder may
waive such notice in writing.

 

22.          Successors.  This Award Agreement shall be binding upon
you, your legal representatives, heirs, legatees and distributees, and upon the
Company, its successors and assigns.

 

23.          Headings.  The titles and headings of Sections are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.

 

24.          Governing Law.  All questions arising with respect to the
provisions of this Agreement shall be determined by application of the laws of
the State of Delaware, without giving any effect to any conflict of law
provisions thereof, except to the extent Delaware law is preempted by federal
law.  The obligation of the Company to
sell and deliver Stock hereunder is subject to applicable laws and to the
approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Stock.

 

25.          Execution of Receipts
and Releases.  Any payment of
cash or any issuance or transfer of shares of Stock or other property to you,
or to your legal representative, heir, legatee or distributee, in accordance
with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such Persons hereunder.  The Company may require you or your legal
representative, heir, legatee or distributee, as a condition precedent to such
payment or issuance, to execute a release and receipt therefor in such form as
it shall determine.

 

26.          Amendment.  This Award Agreement may be amended by the
Board; provided, however, that no amendment may decrease your rights inherent
in this Plan Award prior to such amendment without your express written
consent.

 

27.          The Plan.  This Award Agreement is subject to all the
terms, conditions, limitations and restrictions contained in the Plan.

 

6

 

IN
WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by
its duly authorized officer as of the Date of Grant first above written.

 

	
   

  	
  J.L. HALSEY
  CORPORATION, a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David Burt

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   David Burt

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   President

  
					

 

	
  ACKNOWLEDGED AND AGREED:

  
	
   

  
	
  By:

  	
    /s/ Nicholas Cuadra

  	
   

  
	
   

  
	
  Name:

  	
  Nicholas DeSantis CuadraEXHIBIT 4.1

 

BALLISTIC RECOVERY SYSTEMS, INC.

 

2004 STOCK OPTION PLAN

 

1.                                       Purpose.  The purpose of the 2004 Stock Option  Plan (the “Plan”)
of Ballistic Recovery Systems, Inc., a Minnesota corporation (the “Company”), is to increase shareholder value
and to advance the interests of the Company by furnishing a variety of economic
incentives (“Incentives”) designed
to attract, retain and motivate employees, directors and consultants.  Incentives may consist of opportunities to
purchase or receive shares of common stock, $0.01 par value, of the Company (“Common Stock”), monetary payments or both
on terms determined under this Plan.

 

2.                                       Administration.

 

2.1                                 The
Plan shall be administered by a committee (the “Committee”) of the Board of Directors of the Company (the “Board”). 
The Committee shall consist of not less than two directors of the
Company who shall be appointed from time to time by the board of directors of
the Company.  Each member of the
Committee shall be a “non-employee director” within the meaning of Rule 16b-3
of the Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the “Exchange
Act”), and an “outside director” as defined in Section 162(m)
of the Internal Revenue Code of 1986, as amended (the “Code”). 
The Committee shall have complete authority to determine all provisions
of all Incentives awarded under the Plan (as consistent with the terms of the
Plan), to interpret the Plan, and to make any other determination which it
believes necessary and advisable for the proper administration of the
Plan.  The Committee’s decisions and
matters relating to the Plan shall be final and conclusive on the Company and
its participants.  No member of the
Committee will be liable for any action or determination made in good faith
with respect to the Plan or any Incentives granted under the Plan.  The Committee will also have the authority
under the Plan to amend or modify the terms of any outstanding Incentives in
any manner; provided, however,
that the amended or modified terms are permitted by the Plan as then in effect
and that any recipient on an Incentive adversely affected by such amended or
modified terms has consented to such amendment or modification.  No amendment or modification to an Incentive,
however, whether pursuant to this Section 2 or any other provisions of the
Plan, will be deemed to be a re-grant of such Incentive for purposes of this
Plan.  If at any time there is no
Committee, then for purposes of the Plan the term “Committee” shall mean the
entire Board.

 

2.2                                 In
the event of (i) any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin-off) or any other similar change in corporate structure or
shares, (ii) any purchase, acquisition, sale or disposition of a
significant amount of assets or a significant business, (iii) any change
in accounting principles or practices, or (iv) any other similar change,
in each case with

 

 

respect
to the Company or any other entity whose performance is relevant to the grant
or vesting of an Incentive, the Committee (or, if the Company is not the
surviving corporation in any such transaction, the board of directors of the
surviving corporation) may, without the consent of any affected participant,
amend or modify the vesting criteria of any outstanding Incentive that is based
in whole or in part on the financial performance of the Company (or any
subsidiary or division thereof) or such other entity so as equitably to reflect
such event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be substantially
the same (in the sole discretion of the Committee or the board of directors of
the surviving corporation) following such event as prior to such event;
provided, however, that the amended or modified terms are permitted by the Plan
as then in effect.

 

3.                                       Eligible
Participants.  Employees of the Company
or its subsidiaries (including officers and employees of the Company or its
subsidiaries), directors and consultants, advisors or other independent
contractors who provide services to the Company or its subsidiaries shall
become eligible to receive Incentives under the Plan when designated by the
Committee.  Participants may be
designated individually or by groups or categories (for example, by pay grade)
as the Committee deems appropriate. 
Participation by officers of the Company or its subsidiaries and any
performance objectives relating to such officers must be approved by the
Committee; provided, however,
that if the entire Board is serving as the Committee, then any Incentive
awarded to an officer shall be approved by a majority of the “non-employee
directors” (within the meaning of Rule 16b-3 of the Exchange Act).  Participation by others and any performance
objectives relating to others may be approved by groups or categories (for
example, by pay grade) and authority to designate participants who are not
officers and to set or modify such targets may be delegated.

 

4.                                       Types
of Incentives.  Incentives under the
Plan may be granted in any one or a combination of the following forms:  (a) incentive stock options and
non-statutory stock options (Section 6); (b) stock appreciation
rights (“SARs”) (Section 7); (c) stock
awards (Section 8); (d) restricted stock (Section 8); and (e) performance
shares (Section 9).

 

5.                                       Shares
Subject to the Plan.

 

5.1.                              Number
of Shares.  Subject to adjustment as
provided in Section 11.6, the number of shares of Common Stock which may
be issued under the Plan shall not exceed 600,000 shares of Common Stock.  Shares of Common Stock that are issued under
the Plan or that are subject to outstanding Incentives will be applied to
reduce the maximum number of shares of Common Stock remaining available for
issuance under the Plan.

 

5.2.                              Cancellation.  To the extent that cash in lieu of shares of
Common Stock is delivered upon the exercise of an SAR pursuant to Section 7.4,
the Company shall be deemed, for purposes of applying the limitation on the
number of shares, to have issued the greater of the number of shares of Common
Stock which it was entitled to issue upon such exercise or on the exercise of
any related option.  In the event that a
stock option or SAR granted hereunder expires or is terminated or canceled
unexercised or unvested as to any shares of Common Stock, such shares may again
be issued under the Plan either

 

 

pursuant
to stock options, SARs or otherwise.  In
the event that shares of Common Stock are issued as restricted stock or
pursuant to a stock award and thereafter are forfeited or reacquired by the
Company pursuant to rights reserved upon issuance thereof, such forfeited and
reacquired shares may again be issued under the Plan, either as restricted
stock, pursuant to stock awards or otherwise. 
The Committee may also determine to cancel, and agree to the
cancellation of, stock options in order to make a participant eligible for the
grant of a stock option at a lower price than the option to be canceled.

 

6.                                       Stock
Options.  A stock option is a right
to purchase shares of Common Stock from the Company.  The Committee may designate whether an option
is to be considered an incentive stock option or a non-statutory stock
option.  To the extent that any incentive
stock option granted under the Plan ceases for any reason to qualify as an “incentive
stock option” for purposes of Section 422 of the Code, such incentive
stock option will continue to be outstanding for purposes of the Plan but will
thereafter be deemed to be a non-statutory stock option.  Each stock option granted by the Committee
under this Plan shall be subject to the following terms and conditions:

 

6.1.                              Price.  The option price per share shall be determined
by the Committee, subject to adjustment under Section 11.6.

 

6.2.                              Number.  The number of shares of Common Stock subject
to the option shall be determined by the Committee, subject to adjustment as
provided in Section 11.6.  The
number of shares of Common Stock subject to a stock option shall be reduced in
the same proportion that the holder thereof exercises a SAR if any SAR is
granted in conjunction with or related to the stock option.

 

6.3.                              Duration
and Time for Exercise.  Subject to
earlier termination as provided in Section 11.4, the term of each stock
option shall be determined by the Committee but in no event shall be more than
ten years from the date of grant.  Each
stock option, or portion thereof, shall become exercisable at such time or
times as may be designated by the Committee at the time of the stock option
grant. The Committee may accelerate the vesting of any stock option.

 

6.4.                              Manner
of Exercise.  Subject to the
conditions contained in this Plan and in the agreement with the recipient evidencing
such option, a stock option may be exercised, in whole or in part, by giving
written notice to the Company, specifying the number of shares of Common Stock
to be purchased and accompanied by the full purchase price for such shares.  The exercise price shall be payable (a) in
United States dollars upon exercise of the option and may be paid by cash;
uncertified or certified check; bank draft; (b) by delivery of shares of
Common Stock that are already owned by the participant in payment of all or any
part of the exercise price, which shares shall be valued for this purpose at
the Fair Market Value on the date such option is exercised; or (c) at the
discretion of the Committee, by instructing the Company to withhold from the
shares of Common Stock issuable upon exercise of the stock option shares of
Common Stock in payment of all or any part of the exercise price and/or any
related withholding tax obligations, which shares shall be valued for this
purpose at the Fair Market Value.   The
shares of Common Stock delivered by the participant pursuant to Section 6.4(b) must

 

 

have
been held by the participant for a period of not less than six months prior to
the exercise of the option, unless otherwise determined by the Committee.  Prior to the issuance of shares of Common
Stock upon the exercise of a stock option, a participant shall have no rights
as a shareholder.  Except as otherwise
provided in the Plan, no adjustment will be made for dividends or distributions
with respect to such stock options as to which there is a record date preceding
the date the participant becomes the holder of record of such shares, except as
the Committee may determine in its discretion.

 

6.5.                              Incentive
Stock Options.  Notwithstanding
anything in the Plan to the contrary, the following additional provisions shall
apply to the grant of stock options which are intended to qualify as Incentive
Stock Options (as such term is defined in Section 422 of the Code):

 

(a)                                  The
aggregate Fair Market Value (determined as of the time the option is granted)
of the shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or
any subsidiary or parent corporation of the Company) shall not exceed
$100,000.  The determination will be made
by taking incentive stock options into account in the order in which they were
granted.

 

(b)                                 Any
Incentive Stock Option certificate authorized under the Plan shall contain such
other provisions as the Committee shall deem advisable, but shall in all events
be consistent with and contain all provisions required in order to qualify the
options as Incentive Stock Options.

 

(c)                                  All
Incentive Stock Options must be granted within ten years from the earlier of
the date on which this Plan was adopted by board of directors or the date this
Plan was approved by the Company’s shareholders.

 

(d)                                 Unless
sooner exercised, all Incentive Stock Options shall expire no later than 10
years after the date of grant.  No
Incentive Stock Option may be exercisable after ten (10) years from its
date of grant (five (5) years from its date of grant if, at the time the
Incentive Stock Option is granted, the Participant owns, directly or
indirectly, more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company).

 

(e)                                  The
exercise price for Incentive Stock Options shall be not less than 100% of the
Fair Market Value of one share of Common Stock on the date of grant with
respect to an Incentive Stock Option; provided that the exercise price shall be
110% of the Fair Market Value if, at the time the Incentive Stock Option is
granted, the participant owns, directly or indirectly, more than 10% of the
total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company.

 

 

7.                                       Stock
Appreciation Rights.  An SAR is a
right to receive, without payment to the Company, a number of shares of Common
Stock, cash or any combination thereof, the amount of which is determined
pursuant to the formula set forth in Section 7.4.  An SAR may be granted (a) with respect
to any stock option granted under this Plan, either concurrently with the grant
of such stock option or at such later time as determined by the Committee (as
to all or any portion of the shares of Common Stock subject to the stock
option), or (b) alone, without reference to any related stock option.  Each SAR granted by the Committee under this
Plan shall be subject to the following terms and conditions:

 

7.1.                              Number;
Exercise Price.  Each SAR granted to
any participant shall relate to such number of shares of Common Stock as shall
be determined by the Committee, subject to adjustment as provided in Section 11.6.  In the case of an SAR granted with respect to
a stock option, the number of shares of Common Stock to which the SAR pertains
shall be reduced in the same proportion that the holder of the option exercises
the related stock option.  The exercise
price of an SAR will be determined by the Committee, in its discretion, at the
date of grant but may not be less than 100% of the Fair Market Value of one
share of Common Stock on the date of grant.

 

7.2.                              Duration.  Subject to earlier termination as provided in
Section 11.4, the term of each SAR shall be determined by the Committee
but shall not exceed ten years and one day from the date of grant.  Unless otherwise provided by the Committee,
each SAR shall become exercisable at such time or times, to such extent and
upon such conditions as the stock option, if any, to which it relates is
exercisable.  The Committee may in its
discretion accelerate the exercisability of any SAR.

 

7.3.                              Exercise.  An SAR may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number of SARs which
the holder wishes to exercise.  Upon
receipt of such written notice, the Company shall, within 90 days thereafter,
deliver to the exercising holder certificates for the shares of Common Stock or
cash or both, as determined by the Committee, to which the holder is entitled
pursuant to Section 7.4.

 

7.4.                              Payment.  Subject to the right of the Committee to
deliver cash in lieu of shares of Common Stock (which, as it pertains to
officers and directors of the Company, shall comply with all requirements of
the Exchange Act), the number of shares of Common Stock which shall be issuable
upon the exercise of an SAR shall be determined by dividing:

 

(a)                                  the
number of shares of Common Stock as to which the SAR is exercised multiplied by
the amount of the appreciation in such shares (for this purpose, the “appreciation”
shall be the amount by which the Fair Market Value of the shares of Common
Stock subject to the SAR on the exercise date exceeds (1) in the case of
an SAR related to a stock option, the exercise price of the shares of Common
Stock under the stock option or (2) in the case of an SAR granted alone,
without reference to a related stock option, an amount which shall be

 

 

determined
by the Committee at the time of grant, subject to adjustment under Section 11.6);
by

 

(b)                                 the
Fair Market Value of a share of Common Stock on the exercise date.

 

In lieu of issuing shares of Common Stock upon the
exercise of a SAR, the Committee may elect to pay the holder of the SAR cash
equal to the Fair Market Value on the exercise date of any or all of the shares
which would otherwise be issuable.  No
fractional shares of Common Stock shall be issued upon the exercise of an SAR;
instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common Stock
on the exercise date or to purchase the portion necessary to make a whole share
at its Fair Market Value on the date of exercise.

 

8.                                       Stock
Awards and Restricted Stock.  A stock
award consists of the transfer by the Company to a participant of shares of
Common Stock, without other payment therefor, as additional compensation for
services to the Company.  The participant
receiving a stock award will have all voting, dividend, liquidation and other
rights with respect to the shares of Common Stock issued to a participant as a
stock award under this Section 8 upon the participant becoming the holder
of record of such shares.  A share of
restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant, which
restrictions and conditions may be determined by the Committee as long as such
restrictions and conditions are not inconsistent with the terms of the
Plan.  The transfer of Common Stock
pursuant to stock awards and the transfer and sale of restricted stock shall be
subject to the following terms and conditions:

 

8.1.                              Number
of Shares.  The number of shares to
be transferred or sold by the Company to a participant pursuant to a stock
award or as restricted stock shall be determined by the Committee.

 

8.2.                              Sale
Price.  The Committee shall determine
the price, if any, at which shares of restricted stock shall be sold or granted
to a participant, which may vary from time to time and among participants and
which may be below the Fair Market Value of such shares of Common Stock at the
date of sale.

 

8.3.                              Restrictions.  All shares of restricted stock transferred or
sold hereunder shall be subject to such restrictions as the Committee may
determine, including, without limitation any or all of the following:

 

(a)                                  a
prohibition against the sale, transfer, pledge or other encumbrance of the
shares of restricted stock, such prohibition to lapse at such time or times as
the Committee shall determine (whether in annual or more

 

 

frequent
installments, at the time of the death, Disability or retirement of the holder
of such shares, or otherwise);

 

(b)                                 a
requirement that the holder of shares of restricted stock forfeit, or (in the
case of shares sold to a participant) resell back to the Company at his or her
cost, all or a part of such shares in the event of termination of his or her
employment or consulting engagement during any period in which such shares are
subject to restrictions; or

 

(c)                                  such
other conditions or restrictions as the Committee may deem advisable.

 

8.4.                              Escrow.  In order to enforce the restrictions imposed
by the Committee pursuant to Section 8.3, the participant receiving
restricted stock shall enter into an agreement with the Company setting forth
the conditions of the grant.  Shares of
restricted stock shall be registered in the name of the participant and
deposited, together with a stock power endorsed in blank, with the
Company.  Each such certificate shall
bear a legend in substantially the following form:

 

The
transferability of this certificate and the shares of Common Stock represented
by it are subject to the terms and conditions (including conditions of forfeiture)
contained in the 2004 Stock Option  Plan
of Ballistic Recovery Systems, Inc. (the “Company”), and an agreement
entered into between the registered owner and the Company.  A copy of the 2004 Stock Option Plan and the
agreement is on file in the office of the secretary of the Company.

 

8.5.                              End
of Restrictions.  Subject to Section 11.5,
at the end of any time period during which the shares of restricted stock are
subject to forfeiture and restrictions on transfer, such shares will be
delivered free of all restrictions to the participant or to the participant’s
legal representative, beneficiary or heir.

 

8.6.                              Shareholder.  Subject to the terms and conditions of the
Plan, each participant receiving restricted stock shall have all the rights of
a shareholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including
without limitation, the right to vote such shares.  Dividends paid in cash or property other than
Common Stock with respect to shares of restricted stock shall be paid to the
participant currently.  Unless the
Committee determines otherwise in its sole discretion, any dividends or
distributions (including regular quarterly cash dividends) paid with respect to
shares of Common Stock subject to the restrictions set forth above will be
subject to the same restrictions as the shares to which such dividends or
distributions relate.  In the event the
Committee determines not to pay dividends or distributions currently, the Committee
will determine in its sole discretion whether any interest will be paid on such
dividends or distributions.  In addition,
the Committee in its sole discretion may require such dividends and
distributions to be reinvested (and in such case the participant consents to
such

 

 

reinvestment)
in shares of Common Stock that will be subject to the same restrictions as the
shares to which such dividends or distributions relate.

 

9.                                       Performance
Shares.  A performance share consists
of an award which shall be paid in shares of Common Stock, as described
below.  The grant of a performance share
shall be subject to such terms and conditions as the Committee deems
appropriate, including the following:

 

9.1.                              Performance
Objectives.  Each performance share
will be subject to performance objectives for the Company or one of its
operating units to be achieved by the participant before the end of a specified
period.  The number of performance shares
granted shall be determined by the Committee and may be subject to such terms
and conditions, as the Committee shall determine.  If the performance objectives are achieved,
each participant will be paid in shares of Common Stock or cash as determined
by the Committee.  If such objectives are
not met, each grant of performance shares may provide for lesser payments in
accordance with formulas established in the award.

 

9.2.                              Not
Shareholder.  The grant of
performance shares to a participant shall not create any rights in such
participant as a shareholder of the Company, until the payment of shares of
Common Stock with respect to an award.

 

9.3.                              No
Adjustments.  No adjustment shall be
made in performance shares granted on account of cash dividends which may be
paid or other rights which may be issued to the holders of Common Stock prior
to the end of any period for which performance objectives were established.

 

9.4.                              Expiration
of Performance Share.  If any
participant’s employment or consulting engagement with the Company is
terminated for any reason other than normal retirement, death or Disability
prior to the achievement of the participant’s stated performance objectives,
all the participant’s rights on the performance shares shall expire and
terminate unless otherwise determined by the Committee.  In the event of termination of employment or
consulting by reason of death, Disability, or normal retirement, the Committee,
in its own discretion may determine what portions, if any, of the performance
shares should be paid to the participant.

 

10.                                 Change
of Control.

 

10.1                           Change in Control.  For purposes of this Section 10, a “Change in Control” of the Company will mean
the following:

 

 

(a)                                  the
sale, lease, exchange or other transfer, directly or indirectly, of all or
substantially all of the assets of the Company (in one transaction or in a
series of related transactions) to a person or entity that is not controlled by
the Company;

 

(b)                                 the
approval by the shareholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;

 

(c)                                  any
person becomes after the effective date of the Plan the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i) 20%
or more, but not 50% or more, of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors, unless the transaction resulting in such ownership has been approved
in advance by the Continuing Directors (as defined below), or (ii) 50% or
more of the combined voting power of the Company’s outstanding securities
ordinarily having the right to vote at elections of directors (regardless of
any approval by the Continuing Directors); provided that a traditional
institution or venture capital financing transaction shall be excluded from
this definition;

 

(d)                                 a
merger or consolidation to which the Company is a party if the shareholders of
the Company immediately prior to effective date of such merger or consolidation
have “beneficial ownership” (as defined in Rule 13d-3 under the Exchange
Act), immediately following the effective date of such merger or consolidation,
of securities of the surviving corporation representing (i) 50% or more,
but less than 80%, of the combined voting power of the surviving corporation’s
then outstanding securities ordinarily having the right to vote at elections of
directors, unless such merger or consolidation has been approved in advance by
the Continuing Directors, or (ii) less than 50% of the combined voting
power of the surviving corporation’s then outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Continuing Directors).

 

10.2                           Continuing
Directors.  For purposes of this Section 10,
“Continuing Directors” of the Company will mean any individuals who are members
of the Board on the effective date of the Plan and any individual who
subsequently becomes a member of the Board whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the Continuing Directors (either by specific vote or by approval of
the Company’s proxy statement in which such individual is named as a nominee
for director without objection to such nomination).

 

10.3                           Acceleration of
Incentives.  Without
limiting the authority of the Committee under the Plan, if a Change of Control
of the Company occurs whereby the acquiring entity or successor to the Company
does not assume the Incentives or replace them with substantially equivalent
incentive awards, then upon the effective date of any such Change in Control,
unless otherwise determined by the board of directors and a majority of the
Continuing Directors, (a) all outstanding options and SARs will vest and

 

 

will
become immediately exercisable in full and will remain exercisable for the remainder
of their terms, regardless of whether the participant to whom such options or
SARs have been granted remains in the employ or service of the Company or any
subsidiary of the Company or any acquiring entity or successor to the Company; (b) the
restrictions on all shares of restricted stock awards shall lapse immediately;
and (c) all performance shares shall be deemed to be met and payment made
immediately.

 

10.4                           Cash Payment
for Options.  If a Change
in Control of the Company occurs, then the Committee, if approved by the
Committee in its sole discretion either in an agreement evidencing an option at
the time of grant or at any time after the grant of an option, and without the
consent of any participant affected thereby, may determine that:

 

(a)                                  some or all
participants holding outstanding options will receive, with respect to some or
all of the shares of Common Stock subject to such options, as of the effective
date of any such Change in Control of the Company, cash in an amount equal to
the excess of the Fair Market Value of such shares immediately prior to the
effective date of such Change in Control of the Company over the exercise price
per share of such options; and

 

(b)                                 any options as
to which, as of the effective date of any such Change in Control, the Fair
Market Value of the shares of Common Stock subject to such options is less than
or equal to the exercise price per share of such options, shall terminate as of
the effective date of any such Change in Control.

 

If the
Committee makes a determination as set forth in subparagraph (a) of this Section 10.4,
then as of the effective date of any such Change in Control of the Company,
such options will terminate as to such shares and the participants formerly
holding such options will only have the right to receive such cash
payment(s).  If the Committee makes a
determination as set forth in subparagraph (b) of this Section 10.4,
then as of the effective date of any such Change in Control of the Company such
options will terminate, become void and expire as to all unexercised shares of
Common Stock subject to such options on such date, and the participants
formerly holding such options will have no further rights with respect to such
options.

 

11.                                 General.

 

11.1.                        Effective Date.  The Plan will become effective upon approval
by the Board and the Company’s shareholders.

 

11.2.                        Duration.  The Plan shall remain in effect until all
Incentives granted under the Plan have either been satisfied by the issuance of
shares of Common Stock or the payment of cash or been terminated under the
terms of the Plan and all restrictions imposed on shares of Common Stock in
connection with their issuance under the Plan have lapsed.  No Incentives may be granted under the Plan
after the tenth anniversary of the date the Plan is approved by the
shareholders of the Company.

 

 

11.3.                        Non-transferability of
Incentives.  Except, in the event of
the holder’s death, by will or the laws of descent and distribution to the
limited extent provided in the Plan or the Incentive, unless approved by the
Committee, no stock option, SAR, restricted stock or performance award may be
transferred, pledged or assigned by the holder thereof, either voluntarily or
involuntarily, directly or indirectly, by operation of law or otherwise, and
the Company shall not be required to recognize any attempted assignment of such
rights by any participant.  During a
participant’s lifetime, an Incentive may be exercised only by him or her or by
his or her guardian or legal representative.

 

11.4.                        Effect of Termination, Death
or Disability.  In the event that a
participant ceases to be an employee of or consultant to the Company, or the
participants other service with the Company is terminated, for any reason,
including death, but excluding “Disability,” any Incentives may be exercised or
shall expire at such times as may be determined by the Committee in its sole
discretion in the agreement evidencing an Incentive.  Notwithstanding any provision to the contrary
contained in the Plan, in the event that a participant ceases to be employed or
engaged by the Company, or is otherwise unable to render services to the
Company, as a result of a Disability, any portion of a stock option Incentive
that has vested as of the date of such Disability shall remain exercisable for the
remaining term of such stock option, or such lesser period as provided in the
agreement evidencing the terms of such stock option; provided, however, that all portions of a stock option
Incentive that have not yet vested or are scheduled to vest in the future shall
not vest and the employee’s rights to such portion of the stock option shall
terminate.  Notwithstanding the other
provisions of this Section 11.4, upon a participant’s termination of
employment or other service with the Company and all subsidiaries (other than
as a result of a Disability), the Committee may, in its sole discretion (which
may be exercised at any time on or after the date of grant, including following
such termination), cause options and SARs (or any part thereof) then held by such
participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service and Restricted
Stock Awards, Performance Shares and Stock Awards then held by such participant
to vest and/or continue to vest or become free of transfer restrictions, as the
case may be, following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however, that no Incentive
may remain exercisable or continue to vest beyond its expiration date.  Any Incentive Stock Option that remains
unexercised more than one (1) year following termination of employment by
reason of death or Disability or more than three (3) months following
termination for any reason other than death or Disability will thereafter be
deemed to be a Non-Statutory Stock Option. 
The term “Disability” shall mean, with respect to a participant, that
such participant is unable to perform a significant part of his or her duties
and responsibilities as an employee, director, consultant or other advisor to
the Company by reason of such participant’s physical or mental injury or
illness, and such inability lasts for a period of at least 180 consecutive
days.

 

11.5.                        Additional Conditions.  Notwithstanding anything in this Plan to the
contrary: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the issuance
of any shares of Common

 

 

Stock
pursuant to any Incentive, require the recipient of the Incentive, as a
condition to the receipt thereof or to the receipt of shares of Common Stock
issued pursuant thereto, to deliver to the Company a written representation of
present intention to acquire the Incentive or the shares of Common Stock issued
pursuant thereto for his or her own account for investment and not for
distribution; and (b) if at any time the Company further determines, in
its sole discretion, that the listing, registration or qualification (or any
updating of any such document) of any Incentive or the shares of Common Stock
issuable pursuant thereto is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the consent or approval of
any governmental regulatory body is necessary or desirable as a condition of,
or in connection with the award of any Incentive, the issuance of shares of
Common Stock pursuant thereto, or the removal of any restrictions imposed on
such shares, such Incentive shall not be awarded or such shares of Common Stock
shall not be issued or such restrictions shall not be removed, as the case may
be, in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company. 
Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue
any shares of Common Stock under this Plan, and a participant may not sell,
assign, transfer or otherwise dispose of shares of Common Stock issued pursuant
to any Incentives granted under the Plan, unless (a) there is in effect
with respect to such shares a registration statement under the Securities Act
of 1933, as amended (the “Securities Act”),
and any applicable state or foreign securities laws or an exemption from such
registration under the Securities Act and applicable state or foreign
securities laws, and (b) there has been obtained any other consent,
approval or permit from any other regulatory body which the Committee, in its
sole discretion, deems necessary or advisable. 
The Company may condition such issuance, sale or transfer upon the
receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of Common Stock,
as may be deemed necessary or advisable by the Company in order to comply with
such securities law or other restrictions.

 

11.6.                        Adjustment.  In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
shall be substituted for each of the shares of Common Stock then subject to the
Plan, including shares subject to restrictions, options, or achievement of
performance share objectives, the number and kind of shares of stock or other
securities to which the holders of the shares of Common Stock will be entitled
pursuant to the transaction.  In the
event of any recapitalization, reclassification, stock dividend, stock split,
combination of shares or other similar change in the corporate structure of the
Company or shares of the Company, the exercise price of an outstanding
Incentive and the number of shares of Common Stock then subject to the Plan,
including shares subject to restrictions, options or achievements of
performance shares, shall be adjusted in proportion to the change in
outstanding shares of Common Stock in order to prevent dilution or enlargement
of the rights of the participants.  In
the event of any such adjustments, the purchase price of any option, the
performance objectives of any Incentive, and the shares of Common Stock
issuable pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the

 

 

Committee,
to provide participants with the same relative rights before and after such
adjustment.

 

11.7.                        Incentive Plans and
Agreements.  Except in the case of
stock awards or cash awards, the terms of each Incentive shall be stated in a
plan or agreement approved by the Committee. 
The Committee may also determine to enter into agreements with holders
of options to reclassify or convert certain outstanding options, within the
terms of the Plan, as Incentive Stock Options or as non-statutory stock options
and in order to eliminate SARs with respect to all or part of such options and
any other previously issued options.

 

11.8.                        Withholding.

 

(a)                                  The
Company shall have the right to (i) withhold and deduct from any payments
made under the Plan or from future wages of the participant (or from other
amounts that may be due and owing to the participant from the Company or a
subsidiary of the Company), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all foreign, federal,
state and local withholding and employment-related tax requirements
attributable to an Incentive, or (ii) require the participant promptly to
remit the amount of such withholding to the Company before taking any action,
including issuing any shares of Common Stock, with respect to an Incentive.  At any time when a participant is required to
pay to the Company an amount required to be withheld under applicable income
tax laws in connection with a distribution of Common Stock or upon exercise of
an option or SAR, the participant may satisfy this obligation in whole or in
part by electing (the “Election”)
to have the Company withhold from the distribution shares of Common Stock
having a value up to the amount required to be withheld.  The value of the shares to be withheld shall
be based on the Fair Market Value of the Common Stock on the date that the
amount of tax to be withheld shall be determined (“Tax Date”).

 

(b)                                 Each
Election must be made prior to the Tax Date. 
The Committee may disapprove of any Election, may suspend or terminate
the right to make Elections, or may provide with respect to any Incentive that
the right to make Elections shall not apply to such Incentive.  An Election is irrevocable.

 

(c)                                  If
a participant is an officer or director of the Company within the meaning of Section 16
of the Exchange Act, then an Election is subject to the following additional
restrictions:

 

(1)                                  No
Election shall be effective for a Tax Date which occurs within six months of
the grant or exercise of the award, except that this limitation shall not apply
in the event death or Disability of the participant occurs prior to the
expiration of the six-month period.

 

 

(2)                                  The
Election must be made either six months prior to the Tax Date or must be made
during a period beginning on the third business day following the date of
release for publication of the Company’s quarterly or annual summary statements
of sales and earnings and ending on the twelfth business day following such
date.

 

11.9.                        No Continued Employment,
Engagement or Right to Corporate Assets. 
No participant under the Plan shall have any right, because of his or
her participation, to continue in the employ of the Company for any period of
time or to any right to continue his or her present or any other rate of
compensation.  Nothing contained in the
Plan shall be construed as giving an employee, a consultant, such persons’
beneficiaries or any other person any equity or interests of any kind in the
assets of the Company or creating a trust of any kind or a fiduciary
relationship of any kind between the Company and any such person.

 

11.10.                  Deferral Permitted.  Payment of cash or distribution of any shares
of Common Stock to which a participant is entitled under any Incentive shall be
made as provided in the Incentive. 
Payment may be deferred at the option of the participant if provided in
the Incentive.

 

11.11.                  Amendment of the Plan.  The Board may amend, suspend or discontinue
the Plan at any time; provided, however, that no amendments to the Plan will be
effective without approval of the shareholders of the Company if shareholder
approval of the amendment is then required pursuant to Section 422 of the
Code or the rules of any stock exchange or Nasdaq or similar regulatory
body.  No termination, suspension or
amendment of the Plan may adversely affect any outstanding Incentive without
the consent of the affected participant; provided, however, that this sentence
will not impair the right of the Committee to take whatever action it deems
appropriate under Section 11.6 of the Plan.

 

11.12.                  Definition of Fair Market Value.
For purposes of this Plan, the “Fair Market
Value” of a share of Common Stock at a specified date shall, unless
otherwise expressly provided in this Plan, be determined by reference to the
last sale price of a share of Common Stock on the principal United States
Securities Exchange registered under the 1934 Act on which the Common Stock is
listed (the “Exchange”) or, on the
National Association of Securities Dealers, Inc. Automatic Quotation
System (including the National Market System and the SmallCap Stock Market)
(collectively “NASDAQ”) or, on the
Over The Counter Bulletin Board System (the “OTCBB”)
on the applicable date. If the Exchange, NASDAQ or the OTCBB is closed for
trading on such date, or if the Common Stock does not trade on such date, then
the last sale price used shall be the one on the date the Common Stock last
traded on the Exchange, NASDAQ or the OTCBB. If the Common Stock is not listed
on an Exchange, NASDAQ or the OTCBB, Fair Market Value shall be determined by the
Committee or the Board of Directors of the Company, which such valuation
determination shall be conclusive.

 

 

11.13                     Breach of Confidentiality,
Assignment of Inventions, or Non-Compete Agreements.  Notwithstanding anything in the Plan to the
contrary, in the event that a participant materially breaches the terms of any
confidentiality, assignment of inventions, or non-compete agreement entered
into with the Company or any subsidiary of the Company, whether such breach
occurs before or after termination of such participant’s employment or other
service with the Company or any subsidiary, the Committee in its sole
discretion may immediately terminate all rights of the participant under the
Plan and any agreements evidencing an Incentive then held by the participant
without notice of any kind.

 

11.14                     Governing Law.  The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Minnesota, notwithstanding the conflicts of laws
principles of any jurisdictions.

 

11.15                     Successors
and Assigns.  The Plan will be
binding upon and inure to the benefit of the successors and permitted assigns
of the Company and the participants in the Plan.

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