Document:

exhibit101.htm

                                                          Exhibit 10.1

AMENDMENT NO. 2

 

TO

 

REVOLVING CREDIT AND SECURITY AGREEMENT

 

THIS AMENDMENT NO. 2 (this “Amendment”) is entered into as of August 24, 2011, by and among PRESSTEK, INC., a corporation organized under the laws of the State of Delaware (“Borrower”), the financial institutions set forth on the signature pages hereto (each a “Lender” and collectively, “Lenders”) and PNC BANK, NATIONAL ASSOCIATION as agent for Lenders (in such capacity, “Agent”).

 

BACKGROUND

 

Borrower, Agent and Lenders are parties to a Revolving Credit and Security Agreement dated as of March 5, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) pursuant to which Agent and Lenders provide Borrower with certain financial accommodations.

 

Borrower has requested that Agent and Lenders make certain amendments to the Loan Agreement, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.

 

NOW, THEREFORE, in consideration of any loan or advance or grant of credit heretofore or hereafter made to or for the account of Borrower by Agent and Lenders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions.  All capitalized terms not otherwise defined herein shall have the meanings given to them in the Loan Agreement.

 

2. Amendment to Loan Agreement.  Subject to satisfaction of the conditions precedent set forth in Section 3 below, the Loan Agreement is hereby amended as follows:

 

(a) Section 1.2 is hereby amended by amending the following definitions in their entirety to provide as follows:

 

“Availability Block” shall mean an amount equal to (x) (i) for the period commencing on the Closing Date and ending on the date on which Borrowing Agent shall have delivered to Agent a Compliance Certificate showing compliance with the requirements imposed by Section 6.5 commencing with the fiscal quarter ending on January 1, 2011, $3,500,000, and (ii) for the period commencing on the earlier of (A) January 31, 2012 and (B) the date on which Borrower completes a Sale Leaseback Transaction, and ending on the last day of the Term, $2,000,000; provided, however, that if an Event of Default shall have occurred and is continuing, the amount of the Availability Block shall be $3,500,000, plus (y) upon the occurrence of the events described in clauses (i) - (iii) of Section 4.21(b) and Agent’s release of any Mortgage it has on the Real Property located in Hudson, New Hampshire, an amount equal to the lesser of (i) 35% of the net cash proceeds of the Sale Leaseback Transaction, and (ii) $5,000,000.”

 

“EBITDA” shall mean for any period, without duplication, the sum of (i) Earnings Before Interest and Taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) non-cash expenses of the Borrowers on a Consolidated Basis for such period, including non-cash stock compensation expenses and non-cash expenses incurred in connection with the Sale-Leaseback Transaction, plus (v) cash expenses incurred by Borrowers in connection with the Sale Leaseback Transaction in an aggregate amount not to exceed a one-time charge of $100,000, plus (vi) Restructuring Charges, plus (vii) solely for the purpose of calculating EBITDA through the fiscal quarter ending on or about June 30, 2012, expenses incurred by Borrowers through the fiscal quarter ending on or about June 30, 2012 in connection with the marketing of the 75DI printing press in an aggregate amount not to exceed $1,500,000 .”

 

“Restructuring Charges” shall mean, without duplication, (i) non-cash amounts included in restructuring and other non-cash charges, plus (ii) any separately identified non-cash charges for asset impairments or write-offs, plus (iii) cash out of pocket expenses incurred by Borrowers in connection with the closing of the Transactions, the LI Merger, lease termination payments and employee severance arrangements in an aggregate amount not to exceed $200,000 in any fiscal year, plus (iv) restructuring charges accrued during the fiscal year ending on or about December 31, 2011 in an aggregate amount not to exceed $1,400,000 (such expenses to be included in the definition of Restructuring Charges for the purpose of (x) calculating EBITDA during the fiscal year ending on or about December 31, 2011 and (y) calculating the Fixed Charge Coverage Ratio for all periods that include such expenses), plus (v) any such additional amounts as are acceptable to Agent in its sole discretion.”

 

(b) Section 1.2 is hereby amended by adding the following defined terms in their appropriate alphabetical order:

 

“Amendment No. 2” shall mean that certain Amendment No. 2 to Revolving Credit and Security Agreement dated as of August 24, 2011, among Borrowers, Lenders and Agent.”

 

“Amendment No. 2 Effective Date” shall mean the date on which each of the conditions set forth in Section 3 of Amendment No. 2 have been satisfied.”

 

(c) Article III is hereby amended by inserting a new Section 3.12 immediately following Section 3.11 thereof to provide as follows:

 

“3.12.           Sale Leaseback Fee.  Borrowers shall pay to the Agent for the ratable benefit of the Lenders a fee of $100,000 if the Borrowers fail to complete a Sale Leaseback Transaction on or before November 30, 2011.”

 

(d) Section 13.1 is hereby amended in its entirety to provide as follows:

 

“Term.  This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of each Borrower, Agent and each Lender, shall become effective on the date hereof and shall continue in full force and effect until March 5, 2013 (the “Term”) unless sooner terminated as herein provided.  Borrowers may terminate this Agreement at any time upon thirty (30) days’ prior written notice upon payment in full of the Obligations.  In the event the Obligations are prepaid in full prior to the last day of the Term, Borrowers shall pay to Agent for the benefit of Lenders an early termination fee in an amount equal to $750,000.”

 

3. Conditions of Effectiveness.  This Amendment shall become effective upon Agent receiving (i) four (4) originals (or such lesser number of originals as Agent may require) of this Amendment executed by Borrower and Lenders and consented and agreed to by Guarantors and (ii) an amendment fee of $25,000, which shall be fully earned and payable on the Amendment No. 2 Effective Date, and which may be charged by Agent to Borrowers’ account.

 

4. Representations and Warranties.  Borrower hereby represents and warrants as follows:

 

(a) This Amendment and the Loan Agreement, as amended hereby, constitute legal, valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms.

 

(b) Upon the effectiveness of this Amendment, Borrower hereby reaffirms all covenants, representations and warranties made in the Loan Agreement to the extent the same are not amended hereby and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment (except that any representations and warranties made as of a specific date shall be true and correct as of such date).

 

(c) No Event of Default or Default has occurred and is continuing or would exist after giving effect to this Amendment.

 

(d) No Borrower has any defense, counterclaim or offset with respect to the Loan Agreement.

 

5. Effect on the Loan Agreement.

 

(a) Upon the effectiveness of Section 2 hereof, each reference in the Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Loan Agreement as amended hereby.

 

(b) Except as specifically amended herein, the Loan Agreement, and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed.

 

(c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agent or Lenders, nor constitute a waiver of any provision of the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered under or in connection therewith.

 

6. Governing Law.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of New York.

 

7. Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

 

8. Counterparts; Facsimile and Electronic Transmission.  This Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement.  Any signature delivered by a party by facsimile or electronic transmission (including by “.pdf” or other similar format) shall be deemed to be an original signature hereto.

 

[Remainder of Page Intentionally Left Blank]

 

  

  

  

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first written above.

 

PNC BANK, NATIONAL ASSOCIATION, as Agent and Lender

By:/s/ Patrick McConnell

Name:           Patrick McConnell

Title:           Vice President

PRESSTEK, INC.

By:_ /s/ Jeffrey A. Cook 

Name:           Jeffrey A. Cook

Title:           EVP and CFO

CONSENTED AND AGREED TO:

PRESSTEK EUROPE LIMITED

By:__/s/ Jeffrey A. Cook 

Name:           Jeffrey A. Cook

Title:           Director

PRESSTEK OVERSEAS CORP.

By:_/s/ Jeffrey A. Cook

Name:           Jeffrey A. Cook

Title:           Director

  

  

  

SDK REALTY CORP.

By: /s/ Jeffrey A. Cook

Name:           Jeffrey A. Cook

Title:           Director

ABD CANADA HOLDINGS, INC.

By:/s/ Jeffrey A. Cook

Name:           Jeffrey A. Cook

Title:           Director

PRESSTEK CANADA CORP.

By: /s/ Jeffrey A. Cook

Name:           Jeffrey A. Cook

Title:           DirectorExhibit 10.1

ELECTROMED, INC.

2012 STOCK INCENTIVE PLAN

1.       Purpose
of Plan.

          Under
the Electromed, Inc. 2012 Stock Incentive Plan (the “Plan”), the Company may
grant Options and Equity Units to Employees, Directors, and Consultants. The
Plan is designed to enable the Company and its Subsidiaries to attract, retain
and motivate Participants by providing them the opportunity to acquire equity
ownership in the Company.

2.       Definitions.

          The
following defined terms are used in this Plan:

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

          2.2          “Broker
Exercise Notice” means a notice whereby a Participant, upon exercise of an
Option, irrevocably instructs a broker or dealer to sell a sufficient number of
shares or loan a sufficient amount of money to pay all or a portion of the
exercise price of the Option and/or any related withholding tax obligations and
remit such sums to the Company and directs the Company to deliver stock
certificates to be issued upon such exercise directly to such broker or dealer.

          2.3          “Code”
means the Internal Revenue Code of 1986, as amended. 

          2.4          “Committee”
means the compensation committee appointed under Section 3 to administer the
Plan.

          2.5          “Common
Stock” means the common stock of the Company, or the number and kind of
shares of stock or other securities into which such Common Stock may be changed
in accordance with Section 4.3. 

          2.6          “Company”
means Electromed, Inc., a Minnesota corporation.

          2.7          “Consultant”
means any independent contractor who provides services to the Company.

          2.8          “Control
Group” means the Company and any trade or business under common control
with the Company within the meaning of Code §414(b) and (c).

          2.9          “Director”
means a member of the Board.

          2.10        A Participant has a “Disability” if, by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or to last for a continuous period of at least 12
months:

          (a)          The Participant is unable to engage in any
substantial gainful activity, or

          (b)          The
Participant has received income replacement benefits for a period of at least
three months under a Participating Employer’s accident and health plan.

          2.11        “Employee”
means a common law employee of the Company or a Subsidiary.

          2.12        “Equity
Unit” means a right to receive a share of Common Stock, subject to terms
established under Section 7.

          2.13        “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

          2.14        “Expiration
Date” means the date an Option is scheduled to expire and no longer be
exercisable.

          2.15        “Fair
Market Value” of a share of Common Stock as of a particular day means the
closing price of a share of the Company’s Common Stock on the Nasdaq Capital
Market on such day, or if no sale has been made on such market on such day, on
the last preceding day on which any such sale was made.

          2.16        “Option”
means a non-qualified stock option granted to a Participant pursuant to Section
6.1 or 6.2. 

          2.17        “Participant”
means an Employee, Director or Consultant who has been designated as such.

          2.18        “Payment
Date” is defined in Section 8.5. 

          2.19        “Performance
Period” means the period of time over which Equity Units are earned or
become vested. 

          2.20        “Previously
Acquired Shares” means shares of Common Stock that are already owned by a
Participant.

          2.21        “Securities
Act” means the Securities Act of 1933, as amended.

          2.22        “Separation
from Service” is defined in
applicable guidance under Code §409A, which generally provides that:

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 a Participant will be deemed to have a Separation from Service only
 if the Participant ceases to perform any services for the Company and other
 members of the Control Group, or the Participant continues to provide only
 “insignificant” services;

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 service is “insignificant” if it is performed at a rate that is no
 more than 20% of the average level of services provided by the Participant
 for the preceding three full calendar years;

 

2

	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 a bona fide leave of absence will not be considered a Separation from
 Service for the first six months of such leave or until the Participant no
 longer has a right to reemployment by statute or contract, whichever is
 longer; 

 
	
  

 	
  

 	
  

 
	
  

 	
 (d)

 	
 transfer to an employer in which the Company or another member of the
 Control Group has at least 50% ownership interest is not a Separation from
 Service; and

 
	
  

 	
  

 	
  

 
	
  

 	
 (e)

 	
 for purposes of determining benefits earned by a Participant for
 service as a Director, Separation from Service occurs when he or she ceases
 to be a Director.

 
	
  

 	
  

 	
  

 
	
  

 	
 (f)

 	
 a Consultant is considered to have a Separation from Service upon
 expiration of the contract (or in the case of more than one contract, all
 contracts under which services are performed) if the expiration constitutes a
 good faith and complete termination of the contractual relationship as
 provided in Treas. Reg. 1.409A-1(h)(2)). 

 

          2.23        “Subsidiary”
means any entity in which the Company has a direct or indirect ownership
interest sufficient so that the entity is a member of the Control Group.

3.       Plan
Administration.

          Except
to the extent the Plan explicitly reserves responsibility to the Board, the
Plan shall be administered by the compensation committee (the “Committee”)
appointed by the Board. The Committee shall consist solely of not less than two
members of the Board who are considered (i) non-employee directors within the
meaning of Exchange Act Rule 16b-3 and (ii) outside directors within the
meaning of Code § 162(m). If no such Committee is appointed, the Plan shall be
administered by the Board and all references to the Committee shall be deemed
references to the Board. If the Board determines that an individual appointed
to the Committee does not meet any of the criteria for Committee membership,
the actions of the Committee taken prior to that determination due to the
appointment of that individual shall remain in effect unless the Board
determines otherwise. 

          The
Committee (and in the absence of a Committee, meeting the requirements of the
preceding paragraph, the Board) shall have the following authority, subject to
the terms of the Plan:

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 To
 determine which Employees, Directors and Consultants will be designated as
 Participants.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 To
 determine the terms of each Option including the number of shares of Common
 Stock subject to the Option, the exercise price, the terms under which the
 Option will vest or become exercisable, the Expiration Date of the Option,
 and the period of time (if any) following Separation from Service that the
 option may be exercised.

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 To determine the terms of each award of Equity Units, including any
 performance goals or other requirements that must be met for the underlying
 shares of Common Stock to be distributed.

 

3

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (d)

 	
 To modify the terms of any outstanding Option or Equity Unit in any
 manner permitted by the Plan as then in effect, or to cancel the Option or
 Equity Unit, subject to the following:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (1)

 	
 Subject to Section 4.3, outstanding Options granted under this Plan
 shall not be repriced.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (2)

 	
 If the modification or cancellation adversely affects a Participant,
 it will not apply to that Participant without his or her consent, unless
 required by law or necessary to avoid adverse tax treatment.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (e)

 	
 To delegate to one or more Employees (including but not limited to
 Employees who are Directors) all or any part of its authority under the Plan
 with regard to granting and administering Options or Equity Units for persons
 who are not then subject to the reporting requirements of Section 16 of the
 Exchange Act. (However, Options so granted generally will not qualify as
 “performance-based compensation” for purposes of Code §162(m). Equity Units
 granted under the Plan do not qualify as “performance-based compensation”
 regardless of whether granted by the Board or Committee or pursuant to this
 subsection (e)).

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (f)

 	
 To exercise discretionary authority to construe the terms of the Plan
 and to make all decisions and interpretations necessary or advisable to
 operate the Plan.

 
	
  

 	
  

 	
  

 
	
 4.

 	
 Shares Available for Issuance.

 

          4.1           Maximum
Number of Shares Available. Subject to adjustment as provided in Section
4.3, the maximum number of shares of Common Stock that will be available for
issuance under the Plan will be 200,000 shares of Common Stock.

          4.2           Accounting
for Incentive Awards. Shares of Common Stock that are issued under the Plan
or are subject to outstanding Options or Equity Units will be applied to reduce
the maximum number of shares of Common Stock remaining available for issuance
under the Plan. Any shares of Common Stock that are subject to an Option or
Equity Unit that lapses, expires, is forfeited or for any reason is terminated
unexercised or unvested will automatically again become available for issuance
under the Plan. However, shares withheld for the purpose of paying the purchase
price upon exercise of an Option or paying applicable withholding taxes will
not again become available for issuance under the Plan.

          4.3           Adjustments.
In the event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend (including a
spin-off) or any other change in the corporate structure or shares of the
Company, the Committee (or, if the Company is not the surviving corporation in
any such transaction, the board of directors of the surviving corporation) will
make appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities available for issuance under the Plan and, in
order to prevent dilution or enlargement of the rights of the Participants, the
number, kind and exercise price of securities subject to outstanding Options or
Equity Units.

4

	
  

 	
  

 
	
 5.

 	
 Participation.

 

          The
Board or Committee may designate any Employee, Director or Consultant as a
Participant.

	
  

 	
  

 
	
 6.

 	
 Options.

 

          6.1         Grants
to Employees. The Committee may grant Options to Employees, subject to such
terms and conditions, consistent with the other provisions of the Plan, as may
be determined by the Committee in its sole discretion. For tax purposes, all
Options granted under the Plan are non-qualified stock options; the Plan does
not provide for issuance of incentive stock options qualifying under Code §422.
The aggregate number of shares on which Options may be granted to any one
Employee during any calendar year may not exceed 25% of the 200,000 shares of Common
Stock available for issuance under the Plan. If an Option granted to an
Employee is canceled, said Option will nevertheless be included in applying
said 25% limit.

          6.2         Grants
to Non-Employee Directors or Consultants. The Committee may grant Options
to Directors or Consultants who are not Employees, subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion.

          6.3         Exercise
Price. The per share price to be paid upon exercise of an Option will be
determined at the time of the Option grant. The per share price to be paid by a
Participant upon exercise of an Option will be not less than 100% of the Fair
Market Value of one share of Common Stock on the date of grant.

          6.4         Exercisability
and Duration. An Option will become exercisable at such times and in such
installments as may be determined by the Committee at the time of grant. Unless
otherwise determined by the Committee at the time of grant, the Expiration Date
of each Option will be 10 years from its date of grant.

          6.5         Payment
of Exercise Price. The total purchase price of the shares to be purchased
upon exercise of an Option will be paid entirely in cash (including check, bank
draft or money order); provided, however, that the Committee may allow such
payments to be made, in whole or in part, by tender of a Broker Exercise
Notice, tender of Previously Acquired Shares, Attestation, Net Share Settlement,
or by a combination of such methods. “Attestation” means delivery by a
Participant to the Company of a written affidavit of ownership of Previously
Acquired Shares the Fair Market Value of which is then applied to the exercise
price of the Option in lieu of actual delivery of such Previously Acquired
Shares. Upon receipt of such Attestation of Previously Acquired Shares and
payment for any portion of the exercise price not paid by Attestation, the
Company shall deliver to the Participant a stock certificate for the number of
Option shares so exercised, or may deliver such shares in book entry form,
minus the number of Previously Acquired Shares attested to in the written
affidavit, and minus any shares withheld to cover tax obligations. “Net Share
Settlement” means that upon exercise of an Option, the purchase price is paid
by having the Company withhold a number of shares sufficient to cover the
purchase price and any required tax withholding. If the purchase price upon
exercise of an option is paid through tender of Previously Acquired Shares,
Attestation, or Net Share Settlement, the Fair Market Value on the date of exercise of the stock
delivered or withheld shall equal the total exercise price for the Shares being
purchased.

5

          6.6         Manner
of Exercise. An Option may be exercised by a Participant in whole or in
part from time to time, subject to the conditions contained in the Plan and in
the agreement evidencing such Option, by delivering in person, by facsimile or
electronic transmission or through the mail, a written notice of exercise to
the Company (Attention: Chief Financial Officer) at its principal executive
office in New Prague, Minnesota and paying in full the total exercise price for
the shares of Common Stock to be purchased in accordance with Section 6.5 of
the Plan. The Committee may permit a Participant to enter into a written plan
pursuant to Exchange Act Rule 10b5-1 specifying the date or dates the
Participant’s Options will automatically be exercised.

	
  

 	
  

 
	
 7.

 	
 Equity Units. 

 

          An
Employee, Director or Consultant may be granted one or more Equity Units under
the Plan, and such Equity Units will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee. The Committee may impose such restrictions or conditions, not
inconsistent with the terms of the Plan, to the vesting of such Equity Units as
it deems appropriate, including, without limitation, that the Participant
remain an Employee, Director or Consultant until the end of the Performance
Period established for said Equity Units or that the Company satisfy designated
performance goals during the Performance Period.

	
  

 	
  

 
	
 8.

 	
 Effect of Separation from Service.

 

          8.1         Death
or Disability. If a Participant’s Separation from Service occurs by reason
of his or her death or Disability: 

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 Options outstanding at the time of said Separation
 from Service will not expire as a result of said Separation from Service but
 rather will vest and remain in effect for the remaining term of the Option.
 However, the Committee in its sole discretion may provide at the time it
 grants an Option to a Participant that the Option will expire not later than
 a fixed period of time after the Participant’s Separation from Service.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 All Equity Units then held by the Participant will
 vest. The Company will transfer to the Participant (or to the beneficiary,
 legal representative, heir, or legatee of a deceased Participant) a number of
 shares of Common Stock equal to the number of the Participant’s outstanding
 Equity Units, less any shares withheld to cover taxes. Said transfer shall
 occur as of a date or dates determined by the Committee which shall not be
 later than December 31 of the Year in which the Participant died or was
 determined to have a Disability. However, as permitted by Code §409A, in
 cases where a Participant’s death or Disability occurred in October,
 November, or December, payment shall be considered timely if made by the
 fifteenth day of the third month after the month in which the Participant
 died or was determined to have a Disability.

 

6

          8.2         Separation
from Service After Attaining Age 60. If a Participant’s Separation from
Service occurs after he or she has attained age 60 and for a reason other than
the Participant’s death or Disability:

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 Options outstanding at the time of said Separation from Service will
 not expire as a result of said Separation from Service but rather will vest
 and remain in effect for the remaining term of the Option. However, the
 Committee in its sole discretion may provide at the time it grants an Option
 to a Participant that the Option will expire not later than a fixed period of
 time after the Participant’s Separation from Service.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 A fraction of each outstanding grant of Equity Units will be vested.
 The fraction of a grant that will be vested is the number of Equity Units in
 that grant, multiplied by a fraction (i) the numerator of which is the number
 of months from the beginning of the Performance Period for that grant through
 the month in which the Participant’s Separation from Service occurred and
 (ii) the denominator of which is the total number of months in said
 Performance Period. Except as otherwise provided by the Committee, any Equity
 Units which are not vested will be forfeited.

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 The Company will transfer to the Participant a number of shares of
 Common Stock equal to the number of the Participant’s vested Equity Units
 (determined as provided in (b), less any shares withheld to cover taxes. Said
 transfer shall occur as of a date or dates determined by the Committee which
 shall not be earlier than the Participant’s Payment Date and shall not be
 later than December 31 of the Year in which the Participant’s Payment Date occurred.
 However, as permitted by Code §409A, if a Participant’s Payment Date occurs
 during October, November, or December, payment shall be considered timely if
 made by the fifteenth day of the third month after the month in which the
 Participant’s Payment Date occurred.

 

          8.3         Other
Separation from Service. If a Participant’s Separation from Service occurs
under circumstances not covered under sections 8.1 and 8.2 (i.e. not due to
death or Disability and before age 60), then the provisions of (a) and (b)
shall apply:

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 If the Separation from Service is not for “cause”, (i) Options held
 by the Participant which are exercisable as of the date of Separation from
 Service will remain exercisable for a period of three months after such separation
 (but in no event after the expiration date of any such options), and (ii)
 Options which are not yet exercisable as of the date of the Separation from
 Service will be forfeited immediately. If the Separation from Service is for
 “cause”, all options will be forfeited immediately upon Separation from
 Service, regardless of whether they were then exercisable. 

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 All Equity Units then outstanding will be forfeited, and no payment
 will be made with respect thereto.

 

7

	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 For purposes of this section, the existence of “cause” will be
 determined by the Committee by reference to any employment or other agreement
 or policy applicable to the Participant. In addition, the Committee may
 determine any of the following to constitute “cause”: (i) dishonesty, fraud,
 misrepresentation, embezzlement or deliberate injury or attempted injury, in
 each case related to the Company or any Subsidiary, (ii) any unlawful or
 criminal activity of a serious nature, (iii) any intentional and deliberate
 breach of a duty or duties that, individually or in the aggregate, are
 material in relation to the Participant’s overall duties, or (iv) any material
 breach of any employment, service, confidentiality or noncompete agreement
 entered into with the Company or any Subsidiary. 

 

          8.4         Breach
of Confidentiality or Noncompete Agreements. Notwithstanding anything in
the Plan to the contrary, in the event that a Participant materially breaches
the terms of any confidentiality or noncompete agreement entered into with the
Company or any Subsidiary, whether such breach occurs before or after such
Participant’s Separation from Service, the Committee in its sole discretion may
immediately terminate all rights of the Participant under the Plan and any
agreements evidencing an Option or Equity Unit grant then held by the
Participant without notice of any kind.

          8.5         Payment
Date. A Participant’s “Payment Date” is the first day of the seventh month
after the month in which the Participant’s Separation from Service occurred.
For example, if a Participant’s Separation from Service occurs on May 15, 2012,
her Payment Date is December 1, 2012, and payment must occur on or after
December 1, 2012 and on or before March 15, 2013. If another Participant’s
Separation from Service occurs January 31, 2013, his Payment Date is August 1,
2013 and payment must occur on or after August 1, 2013 and on or before
December 31, 2013.

          8.6         Non-Employee
Directors. Sections 8.1 through 8.5 are not applicable to Options or Equity
Units granted to Directors or Consultants who are not Employees. If such an
individual has a Separation from Service (i.e. ceases to be a Director or
Consultant):

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 He or she may exercise any outstanding Options within 12 months after
 ceasing to be a Director or Consultant (or within such other period as
 approved by the Board or Committee at the time the Options were granted).

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 All Equity Units then held by the
 Participant will vest. The Company will transfer to the Participant a number
 of shares of Common Stock equal to the number of the Participant’s
 outstanding Equity Units. Said transfer shall occur as of a date or dates
 determined by the Company which shall not be later than December 31 of the
 Year in which the Participant ceased to be a Director or Consultant. However,
 as permitted by Code §409A, if a Participant’s Separation from Service occurs
 during October, November or December, payment shall be considered timely if
 made by the fifteenth day of the third month after the month in which the
 Participant ceased to be a Director.

 

          8.7         Options Not Exercisable After Expiration Date.
Notwithstanding any provisions of this Section 8 to the contrary, no Option
will be exercisable after its Expiration Date.

8

9.     Payment of
Withholding Taxes.

          9.1     General
Rules. The Company is entitled to (i) withhold and deduct from the shares
of Common Stock payable under the Plan, 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, or make other arrangements for the collection of, all
legally required amounts necessary to satisfy any and all federal, state and
local withholding and employment-related tax requirements attributable to
exercise of an Option or payment with respect to an Equity Unit, 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 the Option or Equity Unit.

          9.2     Special
Rules. The Committee may, in its sole discretion and upon terms and
conditions established by the Committee, permit or require a Participant to
satisfy, in whole or in part, any withholding or employment-related tax
obligation described in Section 9.1 of the Plan by electing to tender
Previously Acquired Shares (including but not limited to the Shares the
acquisition of which triggered the tax obligation), by withholding shares of
Common Stock payable to the Participant under this Plan, by payments made
pursuant to a Broker Exercise Notice, or by a combination of such methods. 

10.     Rights of
Eligible Recipients and Participants; Transferability.

          10.1     Employment.
Nothing in the Plan will interfere with or limit in any way the right of the
Company or any Subsidiary to terminate the employment of any Employee or
Participant at any time, nor confer upon any Employee or Participant any right
to continue in the employ of the Company or any Subsidiary.

          10.2     Rights
as a Shareholder. As a holder of Options or Equity Units, a Participant
will have no rights as a shareholder unless and until the Options are exercised
or the Equity Units are paid in the form of Common Stock. However, as part of
any grant of Equity Units, the Committee may provide that a Participant will be
entitled to receive cash distributions equivalent to the dividends paid from
time to time on the Common Stock underlying such Units. 

          10.3     Restrictions
on Transfer. Any Option or Equity Unit granted under this Plan shall by its
terms be non-transferable by the grantee other than by will or the laws of
descent and distribution and shall be exercisable during the grantee’s lifetime
only by the grantee or by the grantee’s guardian or legal representative,
except that an Option may, if the Option Agreement so provides, also be
transferable to members of the grantee’s Immediate Family, to a partnership
whose members are only the optionee and/or members of the grantee’s Immediate
Family, or to a trust for the benefit of only the grantee and/or members of the
grantee’s Immediate Family. “Immediate Family” for purposes of this section
includes only the grantee’s child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive relationships.

          10.4        Non-Exclusivity
of the Plan. Nothing contained in the Plan is intended to modify or rescind
any previously approved compensation plans or programs of the Company or create
any limitations on the power or authority of the Board to adopt such additional
or other compensation arrangements as the Board may deem necessary or
desirable.

9

11.     Securities
Law and Other Restrictions.

          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 the Plan, unless
(a) there is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state securities laws or
an exemption from such registration under the Securities Act and applicable
state 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.

12.     Plan
Amendment, Modification and Termination.

          The Board
or Committee may suspend or terminate the Plan or any portion thereof at any
time, and may amend the Plan from time to time in such respects as the Board or
Committee may deem advisable. However, no amendments to the Plan will be
effective without approval of the stockholders of the Company if stockholder
approval of the amendment is then required pursuant to the rules of Nasdaq. No
termination, suspension or amendment of the Plan may adversely affect any outstanding
award without the consent of the affected Participant; provided, however, that
this sentence will not impair the right of the Board or Committee to take
whatever action it deems appropriate under Sections 3(d) and 4.3.

13.      Effective Date and Duration of the
Plan.

          The
Plan is effective upon approval by the Company’s shareholders. The Plan will
terminate at midnight on December 31, 2016, and may be terminated prior to such
time by Board action, and no Options or Equity Units will be granted after such
termination. Awards outstanding upon termination of the Plan may continue to be
exercised or become free of restrictions and paid, in accordance with their
terms.

14.      Miscellaneous.

          14.1     Governing
Law. The Plan will be construed in accordance with the laws of Minnesota.

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

          14.3     Code §409A. The Plan is intended
to satisfy all applicable requirements of Code §409A and will be construed in
light of that intent.

10

This Plan was approved by the shareholders at
a meeting held November 11, 2011.

11

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