Document:

Exhibit 10.3

 

ST.
PAUL TRAVELERS

  EMPLOYEE RESTRICTED STOCK AWARD NOTIFICATION
AND AGREEMENT

 

	
  Participant:

  	
  First_Name, M,
  Last_Name

  	
  Grant Date:

  
	
  Number of Shares:

  	
   

  	
  Vesting Date:

  

 

1.  Grant of Restricted Stock. This restricted stock award (“Award”)
is granted pursuant to the St. Paul Travelers Companies, Inc. 2004 Stock
Incentive Plan (the “Plan”), by The St. Paul Travelers Companies, Inc. (the “Company”)
to you, an employee (the “Participant”). 
The Company hereby grants to the Participant an Award of the number of
shares of restricted Company common stock, no par value (“Common Stock”) set
forth above, pursuant to the Plan, as it may be amended from time to time (the “Plan”)
and subject to the terms, conditions, and restrictions set forth herein.

 

2. Terms and Conditions. The
terms, conditions, and restrictions applicable to the Award are specified in
this award notification and agreement, the Plan and the prospectus dated July
28, 2004 (titled “St. Paul Travelers Equity Awards”), and any applicable
prospectus supplement (together, the “Prospectus”).  The terms, conditions and restrictions in the
Prospectus include, but are not limited to, provisions relating to amendment,
vesting, and cancellation, all of which are hereby incorporated by reference
into this award notification and agreement. 
The terms, conditions and restrictions in this award notification and
agreement, the Prospectus, and the Plan constitute the Award agreement between
the Participant and the Company (“Agreement”). By accepting the Award, the
Participant acknowledges receipt of the Prospectus and that he or she has read
and understands the Prospectus.

 

The Participant understands that the Award and all other incentive
awards are entirely discretionary and that no right to receive an award exists
absent a prior written agreement with the Company to the contrary. The
Participant also understands that the value that may be realized, if any, from
the Award is contingent, and depends on the future market price of the Common
Stock, among other factors.  The
Participant further confirms his or her understanding that the Award is
intended to promote employee retention and stock ownership and to align
employees’ interests with those of shareholders, is subject to vesting
conditions and will be canceled if vesting conditions are not satisfied.  Thus, Participant understands that (a) any
monetary value assigned to the Award in any communication regarding the Award
is contingent, hypothetical, or for illustrative purposes only, and does not
express or imply any promise or intent by the Company to deliver, directly or
indirectly, any certain or determinable cash value to the Participant; (b)
receipt of the Award or any incentive award in the past is neither an
indication nor a guarantee that an incentive award of any type or amount will
be made in the future, and that absent a written agreement to the contrary, the
Company is free to change its practices and policies regarding incentive awards
at any time; and (c) vesting may be subject to confirmation and final
determination by the Company’s Board of Directors or a committee of the Board
that conditions to vesting have been satisfied.

 

3.  Transfer
Restrictions and  Vesting.  The shares of Common Stock of the Award are
subject to the transfer restrictions set forth in the Prospectus.  Until these restrictions lapse, the
Participant may not sell, assign, transfer, pledge, encumber or otherwise
alienate, hypothecate or dispose of any of the Award shares. The Award shall
vest in full, and the restrictions shall terminate on the Award shares, on the
Vesting Date set forth above, provided the Participant remains continuously
employed by the Company or one of its subsidiaries, and any other terms and
conditions are satisfied. Shares of Common Stock will be delivered to the
Participant as soon as practicable after the Award has vested.

 

4. Consent to Electronic Delivery. In lieu of receiving
documents in paper format, the Participant agrees, to the fullest extent
permitted by law, to accept electronic delivery of any documents that the
Company may  desire or be required to
deliver (including, but not limited to, prospectuses, prospectus supplements,
grant or award notifications and agreements, account statements, annual and
quarterly reports, and all other forms or communications) in connection with
this and any other prior or future incentive award or program made or offered
by the Company or its predecessors or successors. Electronic delivery of a
document to the Participant may be via a Company e-mail system or by reference
to a location on a Company intranet or internet site to which Participant has
access.

 

 

5. Administration. In
administering the Plan, or to comply with applicable legal, regulatory, tax, or
accounting requirements, it may be necessary for the Company or the subsidiary
employing the Participant to transfer certain Participant data to the Company,
its subsidiaries, outside service providers, or governmental agencies.  By accepting this Award, the Participant consents,
to the fullest extent permitted by law, to the use and transfer, electronically
or otherwise, of his or her personal data to such entities for such purposes.

 

6. Entire Agreement; No Right to Employment.
The Agreement constitutes the entire understanding between the parties hereto
regarding the Award and supersedes all previous written, oral, or implied
understandings between the parties hereto about the subject matter hereof.  Nothing contained herein, in the Plan, or in
the Prospectus shall confer upon the Participant any rights to continued
employment or employment in any particular position, at any specific rate of
compensation, or for any particular period of time.

 

7. Arbitration; Conflict.  Any disputes under this Agreement shall be
resolved by arbitration in accordance with the Company’s arbitration policies.
In the event of a conflict between the Plan and this grant notification and
agreement, or the terms, conditions, and restrictions of the Award as specified
in the Prospectus, the Plan shall control.

 

8. Acceptance and Agreement by Participant.
By signing below, Participant accepts the Award and agrees to be bound by the
terms, conditions, and restrictions set forth in the Prospectus, the Plan, this
Agreement, and the Company’s policies, as in effect from time to time, relating
to the Plan.

 

	
  THE ST. PAUL TRAVELERS
  COMPANIES, INC.

  	
  PARTICIPANT’S
  SIGNATURE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: John P. Clifford,
  Jr.

  	
   

  	
   

  
	
  Senior Vice President, Human Resources

  	
  First Name, MI, Last Name

  
	
   

  	
  SSN

  

 

2Exhibit 10.4

 

THE ST.
PAUL TRAVELERS COMPANIES, INC.

2004
STOCK INCENTIVE PLAN

 

 

                1.             Purpose.  The purposes of The St. Paul Travelers
Companies, Inc. 2004 Stock Incentive Plan (the “Plan”) are (i) to attract and
retain Employees by providing competitive compensation opportunities, (ii) to
provide Employees with incentive-based compensation in the form of Company
Common Stock, (iii) to attract and compensate non-employee directors for
service as Board and committee members, (iv) to encourage decision making based
upon long-term goals, and (v) to align the interest of Employees and
non-employee directors with that of the Company’s shareholders by encouraging
such persons to acquire a greater ownership position in the Company.

                2.             Definitions.  Wherever used herein, the following terms
shall have the respective meanings set forth below:

                “Award” means an
award to a Participant made in accordance with the terms of the Plan.

                “Board” means the
Board of Directors of the Company.

                “Code” means the
Internal Revenue Code of 1986, as amended from time to time, and any successor
thereto.

                “Company” means The
St. Paul Travelers Companies, Inc.

                                                                “Committee” means the
Compensation Committee of the Board, or a subcommittee of that committee,
consisting of no less than two directors, all of whom shall qualify as “independent
directors” within the meaning of Rule 303A of the New York Stock Exchange, as “outside
directors” within the meaning of Section 162(m) of the Code, and as “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act.

                                                                “Common Stock” means the common
stock of the Company.

                                                                “Change of Control” means the
first to occur of (i) any “person” within the meaning of Section 14(d) of the
Exchange Act, other than the Company, a subsidiary or any employee benefit
plan(s) sponsored by the Company or any subsidiary, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of fifty percent (50%) or more of the Common Stock, other than
pursuant to a purchase of Common Stock from the Company; (ii) individuals who
constitute the Board on the effective date of this Plan, cease for any reason
to constitute at least a majority thereof, provided that any person becoming a
director subsequent to the effective date of this Plan, whose election, or
nomination for election by the Company’s shareholders, was approved by a vote
of at least three quarters of the directors comprising the Board on the
effective date of this Plan (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without

 

objection to such nomination)
shall be, for purposes of this clause (ii), considered as though such person
were a member of the Board on the effective date of this Plan; (iii) any plan or proposal for the
liquidation of the Company is adopted by the stockholders of the Company; (iv)
all or substantially all of the assets of the Company are sold, liquidated or
distributed; or (v) there occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a “Transaction”), in each
case, with respect to which the shareholders of the Company immediately prior
to such Transaction do not, immediately after the Transaction, own more than
fifty percent (50%) of the combined voting power of the Company or other entity
resulting from such Transaction in substantially the same proportion as their
ownership of the voting power of the Company immediately prior to such
Transaction.

                                                                “Employee” means an employee,
including non-employee directors, as defined in General Instruction A to the Registration Statement
on Form S-8 promulgated under the Securities Act of 1933, as amended, or any
successor form or statute, as determined by the Committee.

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

                                                                “Fair Market Value” means, as of
a specified date, one of the following as determined by the Committee, each of
which shall be based on trading prices of a share of Common Stock on the New
York Stock Exchange or on any national securities exchange on which the shares
of Common Stock are then listed, or if the shares were not traded on such date,
then on the next preceding date on which such shares of Common Stock were
traded, all as reported by such source as the Committee may select:  (i) the average of the high and low trading
prices on such date, (ii) the closing price on such date or (iii) the closing
price on the next preceding trading day.

                                                “ISO” means an
incentive stock option as defined in Section 422 of the Code.

“Option Proceeds” means the cash actually received by the Company for the
exercise price in connection with the exercise of a stock option granted under
the Plan or the Prior Plans that is exercised after the effective date of the
Plan plus the tax benefit that could be realized by the Company as a result of
such stock option exercise, which tax benefit shall be determined by
multiplying (a) the amount that is deductible for federal income tax purposes
as a result of such stock option exercise (currently, equal to the amount upon
which the Participant’s withholding tax obligation is calculated) times (b) the
maximum federal corporate income tax rate for the year of exercise. To the
extent a Participant pays the exercise price and/or withholding taxes with
shares of Common Stock, Option Proceeds shall not be calculated with respect to
the amounts so paid with shares.

                “Participant” means an Employee
who is selected by the Committee to participate in the Plan.

                                                                “Performance Conditions” may,
for purposes of Awards under the Plan, include one or more of: earnings per
share, earnings before interest and tax, net income, adjusted net income,
operating income, stock price, total shareholder return, market share, return
on equity, cash return 

2

 

on equity, achievement of profit, loss and/or expense ratio, revenue
targets, cash flows, book value, return on assets or return on capital.  Such Performance Conditions may be based on
the attainment of levels set for such financial measures with respect to the
Company or any subsidiary, division, business unit, or any combination thereof
and may be set as an absolute measure or relative to a designated peer group or
index of comparable companies.  Such
Performance Conditions shall be set and defined by the Committee within the
time period prescribed by Section 162(m) of the Code.  Unless specifically determined by the
Committee at the time a Performance Condition is set, the satisfaction of any
Performance Condition shall be determined without regard to any change in
accounting rules which becomes effective following the time such Performance
Condition is set.

                                                                “Prior Plans” means The St. Paul
Companies, Inc. Amended and Restated 1994 Stock Incentive Plan and the
Travelers Property Casualty Corp. 2002 Stock Incentive Plan (including the
Travelers Property Casualty Corp. Compensation Plan for Non-Employee
Directors).

                3.             Shares
Subject to the Plan.  Subject
to adjustment as provided in Section 20, the number of shares of Common Stock
which shall be available and reserved for grant of Awards under the Plan shall
be 35,000,000.  The shares of Common
Stock issued under the Plan may come from authorized and unissued shares or
shares purchased in the open market.  No
Participant may, in any consecutive thirty-six (36) month period, be granted
Awards of stock options and stock appreciation rights under Sections 7 and 8 of
the Plan, respectively, with respect to more than 3,000,000 shares of Common
Stock or more than 1,000,000 shares of restricted stock under Section 9 of the
Plan, each of which numbers shall be subject to adjustment as provided in
Section 20.

                Shares of Common
Stock subject to an Award that expires unexercised, that is forfeited,
terminated or canceled, that is settled in cash or other forms of property, or
otherwise does not result in the issuance of shares of Common Stock, in whole
or in part, shall thereafter again be available for grant under the Plan.  If the exercise price of any stock option is
satisfied by delivering shares of Common Stock to the Company (by tender of
such shares or attestation) or by authorizing the Company to retain shares of
Common Stock, only the number of shares of Common Stock delivered to the
Participant net of shares of Common Stock delivered to the Company (by tender
or attestation) or retained by the Company shall be deemed delivered for
purposes of determining the maximum number of shares of Common Stock available
for grant under the Plan.  To the extent
any shares of Common Stock subject to an Award are not delivered to a
Participant because such shares are used to satisfy an applicable tax or other
withholding obligations, such shares shall not be deemed to have been delivered
for purposes of determining the maximum number of shares of Common Stock
available for grant under the Plan. Shares of Common Stock purchased by the
Company on the open market using Option Proceeds shall also be available for
grant under the Plan; provided, however, that the increase in the number of
shares of Common Stock available for grant pursuant to such market purchases
shall not be greater than the number that could be repurchased at Fair Market
Value on the date of exercise of the stock option giving rise to such Option
Proceeds.  The provisions of this
paragraph shall also apply to any awards granted under the Prior Plans that are
outstanding on the effective date of the Plan. 
In addition, the number of shares of Common Stock available for grant
under the Plan shall not be reduced by shares subject to Awards granted upon
the

 

3

 

assumption of or in substitution for awards granted by a business or
entity that is merged into or acquired by (or whose assets are acquired by) the
Company.

                4.             Administration.

                4.1           Committee Authority. The Committee shall have full and
exclusive power to administer and interpret the Plan, to grant Awards and to
adopt such administrative rules, regulations, procedures and guidelines
governing the Plan and the Awards as it may deem necessary in its discretion,
from time to time. The Committee’s authority shall include, but not be limited
to, the authority to:

 

                (i)            determine the type of Awards to be granted under the Plan;

 

                (ii)           select Award recipients and determine the extent of their
participation; and

 

                (iii)          establish all other terms, conditions, restrictions and
limitations applicable to Awards and the shares of Common Stock issued pursuant
to Awards, including, but not limited to, those relating to a Participant’s
retirement, death, disability, leave of absence or termination of employment.

 

                The Committee’s right to make any decision,
interpretation or determination under the Plan shall be in its sole and
absolute discretion.

 

                4.2           Administration of the Plan. The
administration of the Plan shall be managed by the Committee.  The Committee shall have the power to
prescribe and modify, as necessary, the form of Award document, to correct any
defect, supply any omission or clarify any inconsistency in the Plan and/or in
any Award document and to take such actions and make such administrative
determinations that the Committee deems appropriate in its discretion.  Any decision of the Committee in the
administration of the Plan, as described herein, shall be final, binding and
conclusive on all parties concerned, including the Company, its shareholders
and subsidiaries and all Participants.

                4.3           Delegation of Authority. The
Committee may at any time delegate to a committee of the Board or one or more
officers of the Company some or all of its authority over the administration of
the Plan, with respect to persons who are not subject to the reporting
requirements of Section 16(a) of the Exchange Act or “covered employees”
described in Section 162(m) of the Code.

 

                5.             Eligibility.  The Committee shall determine which Employees
shall be eligible to receive Awards. No Employee shall have at any time the
right to receive an Award, or having been selected for an Award, to receive any
further Awards.

                The Committee may also grant stock options, stock
appreciation rights, restricted stock, performance awards or other Awards under
the Plan in substitution for, or in connection with the assumption of, existing
options, stock appreciation rights, restricted stock, performance awards or
other awards granted, awarded or issued by another entity and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of
a transaction involving a merger, consolidation, plan of exchange, acquisition
of property or stock, separation, reorganization or liquidation to which the
Company or any subsidiary is a party. 
The terms and conditions of the 

 

4

 

substitute Awards may
vary from the terms and conditions set forth in the Plan to the extent the
Committee at the time of the grant may deem appropriate to conform, in whole or
in part, to the provisions of the awards in substitution for which they are
granted.

 

                6.             Awards.  Awards under the Plan may consist of:
non-qualified stock options, ISOs, stock appreciation rights, restricted stock,
performance awards and any other stock-based award, including deferred stock
units.

                7.             Stock
Options.

                7.1           Types of Options.  Stock options granted under the Plan may be
non-qualified stock options, ISOs or any other type of stock option permitted
under the Code, as determined by the Committee and evidenced by the document
governing the Award.

                7.2           ISOs. The terms and conditions of any ISO shall
be subject to the provisions of Section 422 of the Code and the terms,
conditions, limitations and administrative procedures established by the
Committee.  At the discretion of the
Committee, ISOs may be granted to any Employee of the Company and its
subsidiaries, as such term is defined in Section 424(f) of the Code.  No ISO may be granted to any Participant who,
at the time of such grant, owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the exercise price for such ISO is at least one-hundred
and ten percent (110%) of the Fair Market Value of a share of Common Stock on
the date the ISO is granted, and (ii) the date on which such ISO terminates
is a date not later than the day preceding the fifth anniversary of the date on
which the ISO is granted.   Any
Participant who disposes of shares acquired upon the exercise of an ISO either
within two years after the date of grant of such ISO or within one year after
the transfer of such shares to the Participant, shall notify the Company of
such disposition and of the amount realized upon such disposition.  The maximum number of shares of Common Stock
available under the Plan for issuance as ISOs shall be 35,000,000.

 

                All stock options granted under
the Plan are intended to be nonqualified stock options, unless the applicable
Award Agreement expressly states that the stock option is intended to be an
ISO.  If an stock option is intended to
be an ISO, and if for any reason such stock option (or portion thereof) shall
not qualify as an ISO, then, to the extent of such nonqualification, such stock
option (or portion thereof) shall be regarded as a nonqualified stock option
granted under the Plan; provided that such stock option (or portion
thereof) otherwise complies with the Plan’s requirements relating to
nonqualified stock options.

                7.3           Exercise Price and Period.  The Committee shall establish the exercise
price, which price (other than for substitute options pursuant to Section 5)
shall be no less than the Fair Market Value of a share of the Common Stock on
the date of grant.  Each stock option may
be exercised in whole or in part on the terms provided in the Award document.  The Committee also shall establish the period
during which a stock option is exercisable, provided that in no event may a
stock option be exercisable for a period of more than ten (10) years after the
date of grant, and in no event may a stock option become exercisable earlier
than one year after the date of grant, except in the case of:

                (i)            an earlier date specifically approved by the Committee to
attract a key executive to join the Company;

5

 

                (ii)           a Change of Control if so provided by the Committee; or

                (iii)          a stock option issued as a substitute option pursuant to
Section 5.

                When a stock option
is no longer exercisable, it shall be deemed to have lapsed or expired.

                7.4           Manner of Exercise.  The exercise price of each share as to which
a stock option is exercised and, if requested, the amount of any federal,
state, local or foreign withholding taxes, shall be paid in full at the time of
such exercise.  The exercise of any stock
option shall be contingent on and subject to such payment of the exercise price
and withholding taxes, or the arrangement for the satisfaction of such payments
in a manner satisfactory to the Committee. Such payment shall be made in any of
the following forms:

                (i)            in cash (including check, bank draft or money order),

                (ii)           by delivery of shares of Common Stock owned by the
Participant (by tender of such shares or by attestation) having a Fair Market
Value as of the date of exercise equal to the exercise price for the total
number of shares as to which the option is exercised, subject to (i) the shares
so delivered being “mature shares” for purposes of the applicable accounting
rules then in effect, or otherwise having such characteristics as are required,
if necessary in order to avoid adverse accounting consequences to the Company
on account of use of such shares to pay the exercise price and (ii) such other
guidelines for the tender of Common Stock as the Committee may establish,

                (iii)          if approved by the Committee in the related agreement or
other action by the Committee, authorization of the Company to retain from the
total number of shares of Common Stock as to which the option is exercised that
number of shares of Common Stock having a Fair Market Value as of the date of
exercise equal to the exercise price for the total number of shares as to which
the option is exercised, plus applicable taxes, if requested, and

                (iv)          such other consideration as the Committee deems appropriate,
or by a combination of cash, shares of Common Stock, retention of shares and
such other consideration.

                The
Committee may, with the consent of the Participant, cancel any outstanding
stock option in consideration of a cash payment in an amount not greater than
the excess, if any, of the aggregate Fair Market Value (on the date of such cancellation)
of the shares subject to the stock option over the aggregate exercise price of
such stock option; provided, however, that the Participant’s consent is not
required for such a cancellation pursuant to Section 13(ii) hereof.

                8.             Stock Appreciation Rights.  An Award of a stock appreciation right shall
entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the stock appreciation right all or a
portion of the excess of the Fair Market Value of a specified number of shares
of Common Stock as of the date of exercise of the stock appreciation right over
a specified strike price, which price shall be no less than the Fair Market
Value of a share of the Common Stock on the date of grant of the stock
appreciation right or the date of grant of a previously granted related stock
option, as determined by the Committee in its 

 

6

 

discretion.  A stock appreciation right may be granted in
connection with a previously or contemporaneously granted stock option, or
independent of any stock option.  If
issued in connection with a stock option, the Committee may impose a condition
that the exercise of a stock appreciation right cancels the stock option with
which it is connected and exercise of the connected stock option cancels the
stock appreciation right.  Each stock
appreciation right may be exercised in whole or in part on the terms provided
in the Award document.  Stock
appreciation rights granted independent of any stock option shall be
exercisable for such period as specified by the Committee, but in no event may
stock appreciation rights become exercisable less than one year after the date
of grant, except in the case of:

 

                (i)            a shorter exercise period specifically approved by the
Committee to attract a key executive to join the Company;

                (ii)           a stock appreciation right issued as
a substitute stock appreciation right pursuant to Section 5; or

 

                (iii)          a stock appreciation right that vests
pursuant to the terms of Section 13.

 

In
addition, in no event may a stock appreciation right be exercisable for a
period of more than ten (10) years.  When
a stock appreciation right is no longer exercisable, it shall be deemed to have
lapsed or terminated.  Except as otherwise
provided in the applicable agreement, upon exercise of a stock appreciation
right, payment to the Participant shall be made in the form of cash, shares of
Common Stock or a combination of cash and shares of Common Stock as promptly as
practicable after such exercise.  The
agreement may provide for a limitation upon the amount or percentage of the
total appreciation on which payment (whether in cash and/or shares of Common
Stock) may be made in the event of the exercise of a stock appreciation right.  The Committee may, with the consent of the
Participant, cancel any outstanding stock appreciation right in consideration
of a cash payment in an amount not in excess of the difference between the
aggregate Fair Market Value (on the date of such cancellation) of any shares
subject to the stock appreciation right and the aggregate strike price of such
Shares; provided, however, that the Participant’s consent is not required for
such a cancellation in connection with the purchase of such stock appreciation
right pursuant to Section 13(ii) hereof.

 

                9.             Restricted
Stock.  Restricted stock may
be granted in the form of actual shares of Common Stock, which shall be
evidenced by a certificate with an appropriate legend, or in uncertificated
direct registration form, registered in the name of the Participant but held by
the Company until the end of the restricted period, or share units, as
determined by the Committee.  As a
condition to the receipt of an award of restricted stock in the form of actual
shares of Common Stock, a Participant may be required to execute any stock
powers, escrow agreements or other documents as may be determined by the
Committee.  Any conditions, limitations,
restrictions, vesting and forfeiture provisions shall be established by the
Committee in its discretion.  In order to
reflect the impact of the restrictions on the value of the restricted stock, as
well as the possibility of forfeiture of the restricted stock, the Fair Market
Value may be discounted at a rate to be determined by the Committee, for
purposes of determining the number of shares allocable to an Award.  No portion of an Award of restricted stock
may vest as to any of the shares subject to the Award earlier than one year
from the date of grant, except in the case of:

7

 

                (i)            a Change of Control if so provided by the Committee;

                (ii)           death, retirement or disability if so provided by the
Committee; or

                (iii)          restricted stock issued as a substitute Award pursuant to
Section 5.

The Committee may, on behalf of the Company, approve the purchase by the
Company of any shares subject to an Award of restricted stock, to the extent
vested, for an amount equal to the aggregate Fair Market Value of such shares
on the date of purchase.  Awards of
restricted stock may provide the Participant with dividends or dividend
equivalents (pursuant to Section 16) and voting rights, if in the form of
actual shares, prior to vesting.  With respect to Awards of restricted
stock intended to qualify as “performance-based compensation” under Section
162(m) of the Code, the Committee shall establish and administer Performance
Conditions in the manner described in Section 162(m) and Treasury Regulations
promulgated thereunder as an additional condition to the vesting or payment, as
applicable, of such Awards.

                10.           Performance Awards.  Performance awards may be in the
form of performance shares valued with reference to a share of Common Stock or
performance units valued with reference to an amount of property (including
cash) other than shares of Common Stock. 
Performance awards may also be granted in the form of any other
stock-based Award.  Performance awards
shall entitle a Participant to future payments based upon the attainment of
Performance Conditions established in writing by the Committee.  Payment shall be made in cash, shares of
Common Stock or any combination thereof, as determined by the Committee.  The agreement establishing a performance
award may establish that a portion of a Participant’s Award will be paid for
performance that exceeds the minimum target but falls below the maximum target
available to the Award.  With respect to Awards of restricted
stock intended to qualify as “performance-based compensation” under Section
162(m) of the Code, the Committee shall establish and administer Performance
Conditions in the manner described in Section 162(m) and Treasury Regulations
promulgated thereunder as an additional condition to the vesting or payment, as
applicable, of such performance awards.  The agreement shall also provide for the timing
of payment, which shall not be earlier than one year from date of grant, except
in the case of:

 

                (i)            a Change of Control if so provided by the Committee;

                (ii)           an earlier date specifically approved by the Committee to
attract a key executive to join the Company; or

                (ii)           a performance award issued as a
substitute Award pursuant to Section 5.

 

                Following the conclusion or
acceleration of the period of time designated for attainment of the Performance
Conditions, the Committee shall determine the extent to which the Performance
Conditions have been attained and shall then cause to be delivered to the
Participant (i) a number of shares of Common Stock equal to
the number of performance shares or the value of such performance units
determined by the Committee to have been earned, and/or (ii) cash equal to the
Fair Market Value of such number of performance shares or the value of
performance units, as the Committee shall elect or as shall have been stated in
the applicable agreement.  In no event
may performance awards be granted to a single Participant in any 12-month
period (i) in respect of more than 250,000 shares of Common Stock (if the Award
is 

 

 

8

 

denominated
in shares of Common Stock) or (ii) having a maximum payment with a value
greater than $10,000,000 (if the Award is denominated in other than shares of
Common Stock).

 

                11.  Other Stock-Based Awards.  The Committee may issue unrestricted shares of Common
Stock, or other awards denominated in Common Stock (including but not limited
to phantom stock and deferred stock units), to Participants, alone or in tandem
with other Awards, in such amounts and subject to such terms and conditions as
the Committee shall from time to time in its sole discretion determine.  With respect to such Awards intended to
qualify as “performance-based compensation” under Section 162(m) of the Code,
the Committee shall establish and administer Performance Conditions in the
manner described in Section 162(m) and Treasury Regulations promulgated
thereunder as an additional condition to the vesting and payment of such
Awards. 
In no event may other stock-based Awards described in this Section 11 be
granted to a single Participant in respect of more than 250,000 shares of
Common Stock in any 12-month period.  The
terms and conditions of any such other stock-based Awards subject to time-based
restrictions on vesting will be limited as specified in Section 9 for Awards of
restricted stock.

 

                12.           Award Documents.  Each Award under the Plan shall be evidenced
by an Award document (which may consist of a term sheet or an agreement, and
may be provided in electronic form) setting forth the terms and conditions, as
determined by the Committee, which shall apply to such Award, in addition to
the terms and conditions specified in the Plan. 
The Committee may, in its discretion, place terms in the Award Documents
that provide for the acceleration of any time periods relating to the exercise
or realization of any Awards so that such Awards may be exercised or realized
in full on or before a date fixed by the Committee, in connection with a Change
in Control.

                13.           Change of Control. The Committee may, in its discretion, at
the time an Award is made hereunder or at any time prior to, coincident with or
after the time of a Change of Control:

(i)            provide for the
purchase of such Awards, upon the Participant’s consent, for an amount of cash
equal to the amount which could have been obtained upon the exercise or realization
of such rights had such Awards been currently exercisable or payable;

 

(ii)           make such
adjustment to the Awards then outstanding as the Committee deems appropriate to
reflect such transaction or change; and/or

 

(iii)          cause the Awards
then outstanding to be assumed, or new rights substituted therefore, by the
surviving corporation in such Change of Control.

 

The Committee may,
in its discretion, include such further provisions and limitations in any Award
document as it may deem equitable and in the best interests of the Company.

 

                14.           Withholding.  The Company and its subsidiaries shall have
the right to deduct from any payment to be made pursuant to the Plan, or to
require prior to the issuance or delivery of any shares of Common Stock or the
payment of cash under the Plan, any taxes (whether federal, state, local or
foreign) to be withheld therefrom.  The
Committee may, in its discretion, 

9

permit a Participant to elect to satisfy such withholding obligation by
any of the methods pursuant to which the exercise price of a stock option may
be paid pursuant to Section 7.  Any
satisfaction of tax obligations through the withholding of shares may only be
up to the statutory minimum tax rate. Any fraction of a share of Common Stock
required to satisfy such obligation shall be disregarded and the amount due
shall instead be paid in cash to the Participant.

                15.           Transferability.  Except as provided in this Section, during
the lifetime of a Participant to whom an Award is granted, only that
Participant (or that Participant’s legal representative in the case of
disability) may exercise a stock option or stock appreciation right, or receive
payment with respect to restricted stock, a performance award or any other Award.  The Committee may permit (on such terms,
conditions and limitations as it determines), an Award of restricted stock,
stock options, stock appreciation rights, performance shares or performance
units or other Awards to be transferred or transferable to the extent
permissible by law and, in the case of an ISO, to the extent permissible under
Section 422 of the Code.  Other than as
stated in the preceding sentence, no Award may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a Participant otherwise than by
will or by the laws of descent and distribution, and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company.

                16.           Deferrals and
Settlements.  The Committee may require or permit
Participants to elect to defer the issuance of shares or the settlement of
Awards in cash under such rules and procedures as it may establish under the
Plan.  It may also provide that deferred
settlements include the payment or crediting of interest or dividend
equivalents on the deferral amounts.

17.           Dividends
and Dividend Equivalents.  An
Award (including without limitation a stock option or stock appreciation right
Award) may, if so determined by the Committee, provide the Participant with the
right to receive dividend payments or dividend equivalent payments with respect
to Common Stock subject to the Award (both before and after the Common Stock
subject to the Award is earned, vested or acquired), which payments may be
either made currently or credited to an account for the Participant, and may be
settled in cash or Common Stock, as determined by the Committee.  Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Common Stock,
may be subject to such conditions, restrictions and contingencies as the
Committee shall establish, including the reinvestment of such credited amounts
in Common Stock equivalents.

                18.           No Right to Employment.  No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continue in the employ of the Company or its
subsidiaries. Further, the Company and its subsidiaries expressly reserve the
right at any time to dismiss a Participant without any liability, or any claim
under the Plan, except as provided herein or in any agreement entered into
hereunder.

                19.           Rights as a Shareholder.  Unless the Committee determines otherwise, a
Participant shall not have any rights as a shareholder with respect to shares
of Common Stock covered by an Award until the date the Participant becomes the
holder of record with respect to such shares. 
No adjustment will be made for dividends or other rights for which the
record date is prior to such date, except as provided in Section 17.

 

10

 

                20.           Adjustment of and Changes
in Common Stock.  In the event
of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other change in the corporate
structure or shares of stock of the Company, or any distributions to common
shareholders other than cash dividends, the Committee may make such
substitution or adjustment, if any, as it deems to be equitable, as to the
number and kind of shares of Common Stock or other securities issued or
reserved for issuance pursuant to the Plan and to outstanding Awards (including
but not limited to the number and kind of shares of Common Stock or other
securities to which such Awards are subject, and the exercise or strike price
of such Awards).

                21.           Amendment; Repricing.  The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that (i) no amendment shall
be made without shareholder approval if such approval is necessary in order for
the Plan to continue to comply with the rules of the New York Stock Exchange or
if such approval is necessary in order for the Company to avoid being denied a
tax deduction under Section 162(m) of the Code, and (ii) no amendment,
suspension or termination may adversely affect any outstanding Award without
the consent of the Participant to whom such Award was made.  Except for adjustments pursuant to Section 20,
in no event may any stock option or stock appreciation right granted under the
Plan be amended to decrease the exercise price or strike price thereof, as the
case may be, or be cancelled in conjunction with the grant of any new stock
option or stock appreciation right with a lower exercise price or strike price,
as the case may be, or otherwise be subject to any action that would be
treated, for accounting purposes or under the rules of the New York Stock
Exchange, as a “repricing” of such stock option or stock appreciation right,
unless such amendment, cancellation or action is approved by the Company’s
shareholders in accordance with applicable law and rules of the New York Stock
Exchange.

                22.           Government and Other Regulations. 
The
obligation of the Company to settle Awards in Common Stock shall be subject to
all applicable laws, rules, and regulations, and to such approvals by
governmental agencies as may be required. 
Notwithstanding any terms or conditions of any Award to the contrary,
the Company shall be under no obligation to offer to sell or to sell and shall
be prohibited from offering to sell or selling any shares of Common Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act or 1933 with the Securities and Exchange
Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms
and conditions of such exemption have been fully complied with.  The Company shall be under no obligation to
register for sale under the Securities Act of 1933 any of the shares of Common
Stock to be offered or sold under the Plan. 
If the shares of Common Stock offered for sale or sold under the Plan
are offered or sold pursuant to an exemption from registration under the
Securities Act of 1933, the Company may restrict the transfer of such shares
and may legend the Common Stock certificates representing such shares in such
manner as it deems advisable to ensure the availability of any such exemption.

                23.           Relationship to Other
Benefits.  No payment under
the Plan shall be taken into account in determining any benefits under any
pension, retirement, profit sharing, group insurance or other benefit plan of
the Company or any subsidiary or affiliate of the Company except as otherwise
specifically provided in such other plan.

11

 

                24.           Governing Law.  The Plan shall be construed and its
provisions enforced and administered in accordance with the laws of the State
of Minnesota applicable to contracts made and performed wholly within such
state by residents thereof.

                25.           Effective Date.  The Plan shall be effective as of the date of
approval by the Company’s shareholders in a manner intended to comply with the
shareholder approval requirements of the New York Stock Exchange and Section
162(m) of the Code.  Subject to earlier
termination pursuant to Section 21, the Plan shall have a term of ten (10)
years from its effective date.

                26.           Foreign Employees.  Awards may be granted to Participants who are
foreign nationals or employed outside the United States, or both, on such terms
and conditions different from those applicable to Awards to Participants
employed in the United States as may, in the judgment of the Committee, be
necessary or desirable in order to recognize differences in local law or tax
policy. The Committee also may impose conditions on the exercise or vesting of
Awards in order to minimize the Company’s obligation with respect to tax
equalization for Employees on assignments outside their home country.

12

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