Document:

exv10w4

Exhibit 10.4

GENERAL MILLS, INC.

2005 STOCK COMPENSATION PLAN

	1.	 	PURPOSE OF THE PLAN
	 
	 	 	The purpose of the General Mills, Inc. 2005 Stock Compensation Plan (the “Plan”) is to attract
and retain able individuals by rewarding employees of General Mills, Inc., its subsidiaries and
affiliates (defined as entities in which General Mills, Inc. has a significant equity or other
interest) (collectively, the “Company”) and to align the interests of employees with those of
the stockholders of the Company.
	 
	2.	 	EFFECTIVE DATE AND DURATION OF PLAN
	 
	 	 	This Plan shall become effective as of September 26, 2005, subject to the approval of the
stockholders of the Company at the Annual Meeting on September 26, 2005. Awards may be made
under the Plan until December 31, 2007.
	 
	3.	 	ELIGIBLE PERSONS
	 
	 	 	Only persons who are employees of the Company shall be eligible to receive grants of Stock
Options, Restricted Stock or Restricted Stock Units (each defined below) and become
“Participants” under the Plan. The Compensation Committee of the Company’s Board of Directors
(the “Committee”) shall exercise the discretionary power to determine from time to time the
employees of the Company who are eligible to participate in this Plan.
	 
	4.	 	AWARD TYPES

	 	(a)	 	Stock Option Awards. Under this Plan, the Committee may award Participants options
(“Stock Options”) to purchase common stock of the Company ($.10 par value) (“Common
Stock”). The grant of a Stock Option entitles the Participant to purchase a fixed number of
shares of Common Stock at an “Exercise Price” established by the Committee.
	 
	 	(b)	 	Stock Option Exercise Price. The Exercise Price for each share of Common Stock issuable
under a Stock Option shall not be less than 100% of the Fair Market Value of the Common
Stock on the date of grant, and may exceed the Fair Market Value on the grant date, at the
Committee’s discretion. “Fair Market Value” shall equal the closing price of the Common
Stock on the New York Stock Exchange on the applicable date.
	 
	 	(c)	 	Restricted Stock Awards. The Committee may also grant Participants shares of Common
Stock or the right to receive shares of Common Stock subject to certain restrictions
(“Restricted Stock” or “Restricted Stock Units”) (Stock Options, Restricted Stock and
Restricted Stock Units are sometimes referred to as “Awards”).

	5.	 	COMMON STOCK SUBJECT TO THE PLAN

	 	(a)	 	Maximum Shares Available for Delivery. Subject to Section 5(c), the maximum number of
shares of Common Stock available for issuance to Participants under the Plan shall be
15,000,000. The Company will repurchase a number of shares of Common Stock at least equal
to the number of shares of Common Stock issued under this Plan.
	 
	 	 	 	In addition, any Common Stock covered by a Stock Option granted under the Plan which is
forfeited prior to the end of the vesting period shall be deemed not to be delivered for
purposes of determining the maximum number of shares of Common Stock available for grants
under the Plan. If (i) any Stock Option that is exercised through the delivery of Common
Stock in satisfaction of the exercise price, and (ii) withholding tax requirements arising
upon exercise of any Stock Option are satisfied through the withholding of Common Stock
otherwise deliverable in connection with such exercise, the full number of shares of Common
Stock underlying any such Stock Option that is exercised shall count against the maximum
number of shares available for grants under the Plan.
	 
	 	 	 	Upon forfeiture or termination of Restricted Stock or Restricted Stock Units prior to
vesting, the shares of Common Stock subject thereto shall again be available for Awards under
the Plan.
	 
	 	(b)	 	Individual Share Limits. The number of shares of Common Stock subject to Stock Options
or available for Restricted Stock or Restricted Stock Unit Awards granted under the Plan to
any single Participant over the duration of the Plan shall not exceed 10% of the original
number of shares available under the Plan.
	 
	 	(c)	 	Adjustments for Corporate Transactions. If a corporate transaction has occurred
affecting the Common Stock such that an adjustment to outstanding awards is required to
preserve (or prevent enlargement of) the benefits or potential benefits intended at the
time of grant, then in such manner as the Committee deems equitable, an appropriate
adjustment shall be made to (i) the number and kind of shares which may be awarded under
the Plan; (ii) the number and kind of shares subject to outstanding awards; (iii) the
number of shares credited to an account; and, if applicable, (iv) the exercise price of
outstanding Options; provided that the number of shares of Common Stock subject to any
Option denominated in Common Stock shall always be a whole number. For this purpose a
corporate transaction includes, but is not limited to, any dividend or other distribution
(whether in the form of cash, Common Stock, securities of a subsidiary of the Company,
other securities or other property),

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	 	 	 	recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities
of the Company, issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transactions. Notwithstanding anything
in this paragraph to the contrary, an adjustment to an Option under this paragraph shall be
made in a manner that will not result in a new grant of an Option under Code Section 409A.
	 
	 	(d)	 	Limits on Distribution. Distribution of shares of Common Stock or other amounts under
the Plan shall be subject to the following:

	 	(i)	 	The total number of shares of Common Stock that shall be available for
Restricted Stock and Restricted Stock Unit Awards under the Plan shall be limited to
25% of the total shares authorized for Awards hereunder.
	 
	 	(ii)	 	Notwithstanding any other provision of the Plan, the Company shall have no
liability to deliver any shares of Common Stock under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution would
comply with all applicable laws (including, without limitation, the requirements of the
Securities Act of 1933), and the applicable requirements of any securities exchange or
similar entity.
	 
	 	(iii)	 	To the extent that the Plan provides for issuance of stock certificates to
reflect the issuance of shares of Common Stock or Restricted Stock, the issuance may be
effected on a non-certificated basis, to the extent not prohibited by applicable law or
the applicable rules of any stock exchange.

	 	(e)	 	Stock Deposit Requirements and other Restrictions. The Committee, in its discretion,
may require as a condition to the grant of Awards, the deposit of Common Stock owned by the
Participant receiving such grant, and the forfeiture of such grants, if such deposit is not
made or maintained during the required holding period. Such shares of deposited Common
Stock may not be otherwise sold or disposed of during the applicable holding period or
restricted period. The Committee may also determine whether any shares issued upon exercise
of a Stock Option shall be restricted in any manner.

	6.	 	STOCK OPTION TERM AND TYPE

	 	(a)	 	General. Stock Options granted under the Plan shall be Non-Qualified Stock Options
governed by Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”). The
term of any Stock Option granted under the Plan shall be determined by the Committee,
provided that the term of a Stock Option shall not exceed 10 years and one month.
	 
	 	(b)	 	No Reload Rights. Stock Options granted under this Plan shall not contain any provision
entitling the optionee to the automatic grant of additional options in connection with any
exercise of the original option.
	 
	 	(c)	 	No Repricing. Subject to Section 5(c), outstanding Stock Options granted under this
Plan shall under no circumstances be repriced.

	7.	 	GRANT, EXERCISE AND VESTING OF STOCK OPTIONS

	 	(a)	 	Grant. Subject to the limits otherwise imposed by the terms of this Plan, the Committee
has discretionary authority to determine the size of a Stock Option grant, which may be
tied to meeting performance-based requirements.
	 
	 	(b)	 	Exercise. Except as provided in Sections 11 and 12 (Change of Control and Termination
of Employment), each Stock Option may be exercised only in accordance with the terms and
conditions of the Stock Option grant and during the periods as may be established by the
Committee. A Participant exercising a Stock Option shall give notice to the Company of such
exercise and of the number of shares elected to be purchased prior to 4:30 P.M. CST/CDT on
the day of exercise, which must be a business day at the executive offices of the Company.
	 
	 	(c)	 	Vesting. Stock Options shall not be exercisable unless vested. Subject to Sections 11
and 12 Stock Options shall be fully vested only after four years of the Participant’s
continued employment with the Company following the date of the Stock Option grant.
	 
	 	(d)	 	Payment. The Exercise Price shall be paid to the Company at the time of such exercise,
subject to any applicable rule or regulation adopted by the Committee:

	 	(i)	 	in cash (including check, draft, money order or wire transfer made payable to
the order of the Company);
	 
	 	(ii)	 	through the tender of shares of Common Stock owned by the Participant (by
either actual delivery or attestation); or
	 
	 	(iii)	 	by a combination of (i) and (ii) above.

	 	 	 	For determining the amount of the payment, Common Stock delivered pursuant to (ii) or (iii)
shall have a value equal to the Fair Market Value of the Common Stock on the date of
exercise.

	8.	 	RESTRICTED STOCK AND RESTRICTED STOCK UNITS
	 
	 	 	Restricted Stock and Restricted Stock Units may be awarded on either a discretionary or
performance-based method.

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	 	(a)	 	Discretionary Awards. With respect to discretionary Awards of Restricted Stock and
Restricted Stock Units, the Committee shall

	 	(i)	 	Select Participants to whom Awards will be made;
	 
	 	(ii)	 	Determine the number of shares of Restricted Stock or the number of Restricted
Stock Units to be awarded to a Participant;
	 
	 	(iii)	 	Determine the length of the restricted period, which shall be no less than four
years;
	 
	 	(iv)	 	Determine the purchase price, if any, to be paid by the Participant for
Restricted Stock or Restricted Stock Units; and
	 
	 	(v)	 	Determine any restrictions other than those set forth in this Section 8.

	 	(b)	 	Performance-Based Awards. With respect to Awards of performance-based Restricted Stock
and Restricted Stock Units, the intent is to grant such Awards so as to satisfy the
requirements for “qualified performance-based compensation” under Internal Revenue Code
section 162(m). Performance-based Awards are subject to the following:

	 	(i)	 	The Committee has exclusive authority to determine which Participants may be
awarded performance-based Restricted Stock and Restricted Stock Units.
	 
	 	(ii)	 	In order for any Participant to be awarded Restricted Stock or Restricted Stock
Units for a Performance Period (defined below), the net earnings from continuing
operations excluding items identified and disclosed by the Company as non-recurring or
special costs and after taxes (“Net Earnings”) of the Company for such Performance
Period must be greater than zero.
	 
	 	(iii)	 	At the end of the Performance Period, if the Committee determines that the
requirement of Section 8(b)(ii) has been met, each Participant eligible for a
performance-based Award shall be deemed to have earned an Award equal in value to the
Maximum Amount, or such lesser amount as the Committee shall determine in its discretion
to be appropriate. The Committee may base this determination of grant size on
performance-based criteria and in no case shall this have the effect of increasing an
Award payable to another Participant. For purposes of computing the value of Awards,
each Restricted Stock or Restricted Stock Unit shall be deemed to have a value
equivalent to the Fair Market Value of one share of Common Stock on the date the Award
is granted.
	 
	 	(iv)	 	In addition to the limitation on the number of shares of Common Stock available
for Awards under section 5(b) hereof, in no event shall the total value of the
performance-based Restricted Stock or Restricted Stock Unit Award granted to any
Participant for any one Performance Period exceed 0.5% of the Company’s Net Earnings
for that Performance Period (such amount is the “Maximum Amount”).
	 
	 	(v)	 	The Committee shall determine the length of the restricted period which,
subject to Sections 11 and 12, shall be no less than four years.
	 
	 	(vi)	 	“Performance Period” means a fiscal year of the Company, or such other period
as the Committee may from time to time establish.

	 	 	Subject to the restrictions set forth in this Section 8, each Participant who receives
Restricted Stock shall have all rights as a stockholder with respect to such shares, including
the right to vote the shares and receive dividends and other distributions.
	 
	 	 	Each Participant who receives Restricted Stock Units shall be eligible to receive, at the
expiration of the applicable restricted period, one share of Common Stock for each Restricted
Stock Unit awarded, and the Company shall issue to each such Participant that number of shares
of Common Stock. Participants who receive Restricted Stock Units shall have no rights as
stockholders with respect to such Restricted Stock Units until such time as share certificates
for Common Stock are issued to the Participants; provided, however, that quarterly during the
applicable restricted period for all Restricted Stock Units awarded hereunder, the Company shall
pay to each such Participant an amount equal to the sum of all dividends and other distributions
paid by the Company during the prior quarter on that equivalent number of shares of Common
Stock.
	 
	 	 	The Committee may in its discretion permit a Participant to defer receipt of any Common Stock
issuable upon the lapse of any restriction of Restricted Stock or Restricted Stock Units,
subject to such rules and procedures as it may establish. In particular, the Committee shall
establish rules relating to such deferrals intended to comply with the requirements of Internal
Revenue Code §409A, including without limitation, the time when a deferral election can be made,
the period of the deferral, and the events that would result in payment of the deferred amount.
	 
	9.	 	TRANSFERABILITY OF AWARDS
	 
	 	 	Except as otherwise provided by rules of the Committee, no Stock Options shall be transferable
by a Participant otherwise than (i) by the Participant’s last will and testament or (ii) by the
applicable laws of descent and distribution, and such Stock Options shall be exercised during
the Participant’s lifetime only by the Participant or his or her guardian or legal
representative. Except as otherwise provided in Section 8, no shares of Restricted Stock and no
Restricted Stock Units shall be sold, exchanged, transferred, pledged or otherwise disposed of
during the restricted period.

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	10.	 	TAXES
	 
	 	 	Whenever the Company issues Common Stock under the Plan, the Company may require the recipient
to remit to the Company an amount sufficient to satisfy any Federal, state or local tax
withholding requirements prior to the delivery of such Common Stock, or the Company may in its
discretion withhold from the shares to be delivered shares sufficient to satisfy all or a
portion of such tax withholding requirements.
	 
	11.	 	CHANGE OF CONTROL
	 
	 	 	Each outstanding Stock Option shall become immediately and fully exercisable for a period of one
(1) year following the date of the following occurrences, each constituting a “Change of
Control”:

	 	(a)	 	The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the 1934 Act), (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of voting securities of the Company
where such acquisition causes such Person to own 20% or more of the combined voting power
of the then outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Voting Securities”); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not be deemed to result
in a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction that complies with clauses
(i), (ii) and (iii) of subsection (c) below; and provided, further, that if any Person’s
beneficial ownership of the Outstanding Voting Securities reaches or exceeds 20% as a
result of a transaction described in clause (i) or (ii) above, and such Person subsequently
acquires beneficial ownership of additional voting securities of the Company, such
subsequent acquisition shall be treated as an acquisition that causes such Person to own
20% or more of the Outstanding Voting Securities; or
	 
	 	(b)	 	Individuals who, as of the date hereof, constitute the Board of Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual was a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
	 
	 	(c)	 	The approval by the shareholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the assets of the
Company (“Business Combination”) or, if consummation of such Business Combination is
subject, at the time of such approval by stockholders, to the consent of any government or
governmental agency, the obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination pursuant to which (i) all or
substantially all of the individuals and entities who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the Company or all or substantially
all of the Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Voting Securities, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or
	 
	 	(d)	 	Approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company.

	 	 	After such one (1) year period the normal Stock Option exercise provisions of the Plan shall
govern. Notwithstanding any other provision of the Plan, but subject to Section 6, in the event
a Participant’s employment with the Company is terminated within two (2) years of any of the
events specified in (a), (b), (c) or (d), all outstanding Stock Options of such Participant at
that date of termination shall be exercisable for a period of six (6) months beginning on the
date of termination.
	 
	 	 	With respect to Stock Option grants outstanding as of the date of any such Change of Control
which require the deposit of owned Common Stock as a condition to obtaining rights, the deposit
requirement shall be terminated as of the date of the Change of Control.
	 
	 	 	In the event of a Change of Control, a Participant shall fully vest in all shares of Restricted
Stock and Restricted Stock Units, effective as of the date of such Change of Control. If the
Change of Control constitutes a “change in control” event as described in IRS regulations or
other guidance under Code section 409A(a)(2)(A)(v), Participants’ Restricted Stock Units shall
be settled upon

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	 	 	the Change of Control. If the Change of Control does not constitute a “change in control” event
as described in IRS regulations or other guidance under Code section 409A(a)(2)(A)(v),
Restricted Stock Units that are not Section 409A Restricted Stock Units and on which a deferral
election was not made shall be settled upon the Change of Control. However, the Section 409A
Restricted Stock Units, or Restricted Stock Units for which a proper deferral election was made,
shall be settled on the date the original restriction period would have closed, or the date
elected pursuant to the proper deferral election, as applicable.
	 
	12.	 	TERMINATION OF EMPLOYMENT

	 	(a)	 	Resignation or Termination for Cause. If the Participant’s employment by the Company is
terminated by either

	 	(i)	 	the voluntary resignation of the Participant, or
	 
	 	(ii)	 	a Company discharge due to Participant’s illegal activities, poor work
performance, misconduct or violation of the Company’s Code of Conduct, policies or
practices,

	 	 	then Participant’s Stock Options shall terminate three months after such termination (but in no
event beyond the original full term of the Stock Options) and no Stock Options shall become
exercisable after such termination, and all shares of Restricted Stock and Restricted Stock
Units which are subject to restriction and not vested on the date of termination shall be
forfeited.

	 	(b)	 	Other Termination. If the Participant’s employment by the Company terminates for any
reason other than specified in Sections 11, 12 (a), (c), (d) or (e), the following rules
shall apply:

	 	(i)	 	In the event that, at the time of such termination, the sum of the
Participant’s age and service with the Company equals or exceeds 70, the Participant’s
outstanding Stock Options shall continue to become exercisable according to the
schedule established at the time of grant unless otherwise provided in the applicable
Award agreement, and all shares of Restricted Stock and Restricted Stock Units shall
fully vest and be paid (or deferred, as appropriate) immediately. Stock Options shall
remain exercisable for the remaining full term of such Stock Options.
	 
	 	(ii)	 	In the event that, at the time of such termination, the sum of Participant’s
age and service with the Company is less than 70, Participant’s outstanding
unexercisable Stock Options and unvested Restricted Stock and Restricted Stock Units
shall become exercisable or vest, as the case may be, and be paid (or deferred, as
appropriate) immediately as of the date of termination, in a pro-rata amount based on
the full months of employment completed during the full vesting period from the date of
grant to the date of termination with such newly-vested Stock Options and Stock Options
exercisable on the date of termination remaining exercisable for the lesser of one year
from the date of termination and the original full term of the Stock Option. All other
Stock Options, shares of Restricted Stock and Restricted Stock Units shall be forfeited
as of the date of termination. Provided, however, that if the Participant is an
executive officer of the Company, the Participant’s outstanding Stock Options which, as
of the date of termination are not yet exercisable, shall become exercisable effective
as of the date of such termination and, with all outstanding Stock Options already
exercisable on the date of termination, shall remain exercisable for the lesser of one
year following the date of termination and the original full term of the Stock Option,
and all shares of Restricted Stock and Restricted Stock Units shall fully vest as of
the date of termination and be paid (or deferred, as appropriate) immediately.

	 	 	Notwithstanding the foregoing, any Section 409A Restricted Stock Units that vest under this
Section 12(b) shall be paid on the Participant’s separation from service (within the meaning of
Code section 409A), or in the case of a Participant who is a specified employee (within the
meaning of Code section 409A) shall be paid on the first day of the seventh month following the
month of separation from service.

	 	(c)	 	Death. If a Participant dies while employed by the Company, any Stock Option
previously granted under this Plan shall fully vest and become exercisable upon death and
together with all other outstanding Stock Options may be exercised by the person(s)
authorized in accordance with Section 13(f) of this Plan. Such Stock Options shall be
exercisable for the remaining full term of such Awards.
	 
	 	 	 	A Participant who dies while employed by the Company during any applicable restricted period
shall fully vest in Awards of Restricted Stock or Restricted Stock Units, effective as of the
date of death, and such shares shall be paid to the person(s) designated under the terms of
Section 13(f) of this Plan.
	 
	 	(d)	 	Retirement. The Committee shall determine, at the time of grant, the treatment of the
Stock Options, Restricted Stock and Restricted Stock Units upon the retirement of the
Participant. Unless other terms are specified in the original Grant, if the termination of
employment is due to a Participant’s retirement on or after age 55, the Participant may
exercise a Stock Option, subject to the original terms and conditions of the Stock Option
and shall fully vest in and be paid or have deferred all shares of Restricted Stock or
Restricted Stock Units effective as of the date of retirement (unless any such Award
specifically provides otherwise). However, the Restricted Stock Units without a proper
deferral election that vest under this Section 12(d) shall be payable on the Participant’s
separation from service (within the meaning of Code section 409A) or in the case of a
Participant who is a specified employee (within the meaning of Code section 409A) shall be
paid on the first day of the seventh month following the month of separation from service.

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	 	 	 	A Restricted Stock Unit that could vest upon retirement under this Section 12(d) at any time
within the Award’s restricted period shall be referred to as a “Section 409A Restricted Stock
Unit.”
	 
	 	(e)	 	Spin-offs. If the termination of employment is due to the cessation, transfer, or
spin-off of a complete line of business of the Company, the Committee, in its sole
discretion, shall determine the treatment of all outstanding Awards under the Plan. Such
treatment shall be consistent with Code section 409A, and in particular will take into
account whether a separation from service has occurred within the meaning of section 409A.

	13.	 	ADMINISTRATION OF THE PLAN

	 	(a)	 	Administration. The authority to control and manage the operations and administration
of the Plan shall be vested in the Committee in accordance with this Section 13.
	 
	 	(b)	 	Selection of Committee. The Committee shall be selected by the Board, and shall consist
of two or more members of the Board.
	 
	 	(c)	 	Powers of Committee. The authority to manage and control the operations and
administration of the Plan shall be vested in the Committee, subject to the following:

	 	(i)	 	Subject to the provisions of the Plan, the Committee will have the authority
and discretion to select from among the eligible Company employees those persons who
shall receive Awards, to determine the time or times of receipt, to determine the
types of Awards and the number of shares covered by the Awards, to establish the
terms, conditions, performance criteria, restrictions, and other provisions of such
Awards, and (subject to the restrictions imposed by Section 14) to cancel or suspend
Awards. In making such determinations, the Committee may take into account the nature
of services rendered by the individual, the individual’s present and potential
contribution to the Company’s success and such other factors as the Committee deems
relevant.
	 
	 	(ii)	 	The Committee will have the authority and discretion to establish terms and
conditions of Awards as the Committee determines to be necessary or appropriate to
conform to applicable requirements or practices of jurisdictions outside of the United
States.
	 
	 	(iii)	 	The Committee will have the authority and discretion to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan, to
determine the terms and provisions of any agreements made pursuant to the Plan, and to
make all other determinations that may be necessary or advisable for the administration
of the Plan.
	 
	 	(iv)	 	Any interpretation of the Plan by the Committee and any decision made by it
under the Plan is final and binding.
	 
	 	(v)	 	The Plan shall at all times be managed and operated in accordance with
applicable laws.

	 	(d)	 	Delegation by Committee. Except to the extent prohibited by applicable law or the
applicable rules of a stock exchange, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate all or any
part of its responsibilities and powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any time.
	 
	 	(e)	 	Code section 409A. To the extent that such requirements are applicable, this Plan is
intended to comply with the requirements of section 409A of the Internal Revenue Code of
1986 and shall be interpreted and administered in accordance with that intent. If any
provision of the Plan would otherwise conflict with or frustrate this intent, that
provision will be interpreted and deemed amended so as to avoid the conflict. Further, for
purposes of the limitations on nonqualified deferred compensation under section 409A, each
payment of compensation under this Plan shall be treated as a separate payment of
compensation for purposes of applying the section 409A deferral election rules and the
exclusion from section 409A for certain short-term deferral amounts.
	 
	 	(f)	 	Designation of Beneficiary. Each Participant to whom an Award has been made under the
Plan may designate a beneficiary or beneficiaries to exercise any Award or to receive any
payment which under the terms of the Plan and the relevant Award Agreement may become
exercisable or payable on or after the Participant’s death. At any time, and from time to
time, any such designation may be changed or cancelled by the Participant without the
consent of any such beneficiary. Any such designation, change or cancellation must be on a
form provided for that purpose by the Committee and shall not be effective until received
by the Committee. Such form may establish other rules as the Committee deems appropriate.
If no beneficiary has been properly designated by a deceased Participant, or if all the
designated beneficiaries have predeceased the Participant, the beneficiary shall be the
Participant’s estate. If the Participant designates more than one beneficiary, any Stock
Options shall be divided among beneficiaries equally, and any payments under the Plan to
such beneficiaries shall be made in equal shares, unless the Participant has expressly
designated otherwise, in which case Stock Options shall be divided, and the payments shall
be made, in the portions designated by the Participant.

	14.	 	AMENDMENTS OF THE PLAN
	 
	 	 	The Committee may from time to time prescribe, amend and rescind rules and regulations relating
to the Plan. Subject to the approval of the Board of Directors, where required, the Committee
may at any time terminate, amend, or suspend the operation of

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	 	 	the Plan, provided that no action shall be taken by the Board of Directors or the Committee
without the approval of the stockholders which would

	 	(a)	 	except as provided in Section 5(c), materially increase the number of shares which may
be issued under the Plan;
	 
	 	(b)	 	permit granting of Stock Options at less than Fair Market Value;
	 
	 	(c)	 	except as provided in Section 5(c), permit the repricing of outstanding Stock Options;
or
	 
	 	(d)	 	amend the maximum shares set forth in Section 5(b) which may be granted to any single
Participant.

	 	 	No termination, modification, suspension, or amendment of the Plan shall alter or impair the
rights of any Participant pursuant to an outstanding Award without the consent of the
Participant. There is no obligation for uniformity of treatment of Participants under the Plan.
	 
	15.	 	FOREIGN JURISDICTIONS
	 
	 	 	The Committee may adopt, amend, and terminate such arrangements, not inconsistent with the
intent of the Plan, as it may deem necessary or desirable to make available tax or other
benefits of the laws of any foreign jurisdiction, to employees of the Company who are subject to
such laws and who receive Awards under the Plan.
	 
	16.	 	NON-ALIENATION OF RIGHTS AND BENEFITS
	 
	 	 	Subject to Section 9, no right or benefit under the Plan shall be subject to alienation, sale,
assignment, pledge, or encumbrance and any attempt to do so shall be void. No right or benefit
under the Plan shall be subject to the debts, contacts, liabilities or torts of the person
entitled to such rights or benefits.
	 
	17.	 	LIMITATION OF LIABILITY OR OBLIGATION OF THE COMPANY
	 
	 	 	Nothing in the Plan shall be construed

	 	(a)	 	to give any employee of the Company any right to be granted any Award other than at the
sole discretion of the Committee;
	 
	 	(b)	 	to give any Participant any rights whatsoever with respect to shares of Common Stock
except as specifically provided in the Plan;
	 
	 	(c)	 	to limit in any way the right of the Company or any Subsidiary to terminate, change or
modify, with or without cause, the employment of any Participant at any time; or
	 
	 	(d)	 	to be evidence of any agreement or understanding, express or implied, that the Company
or any Subsidiary will employ any Participant in any particular position at any particular
rate of compensation or for any particular period of time.

	 	 	Payments and other benefits received by a Participant under an Award shall not be deemed part of
a Participant’s regular, recurring compensation for purposes of any termination, indemnity or
severance pay laws and shall not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan, contract or similar arrangement provided by the
Company or any Subsidiary, unless expressly so provided by such other plan, contract or
arrangement.
	 
	18.	 	NO LOANS
	 
	 	 	The Company shall not lend money to any Participant to finance a transaction under this Plan.
	 
	19.	 	NOTICES
	 
	 	 	All notices to the Company regarding the Plan shall be in writing, effective as of actual
receipt by the Company, and shall be sent to:

	 	 	 	Attention: Corporate Compensation

General Mills, Inc.

Number One General Mills Boulevard

Minneapolis, MN 55426

	20.	 	RECOGNITION AWARDS
	 
	 	 	Up to 10,000 shares of Common Stock may be awarded as Recognition Awards in any calendar year
during the duration of the Plan. A Company officer may identify employees of the Company who
have made special contributions to the business and/or performance of the Company and request
that the Corporate Secretary deliver Recognition Awards to such Participants in recognition of
such contributions. Each year, the Committee shall review the grants of Recognition Awards made
in the prior year. Recognition Award shares may be fully vested upon grant or subject to such
vesting conditions as the Committee may authorize.

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Exhibit 10.5

GENERAL MILLS, INC.

2006 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

1. PURPOSE

     The General Mills, Inc. 2006 Compensation Plan for Non-Employee Directors (the “Plan”) is
hereby amended and restated, effective September 25, 2006, by General Mills, Inc. The amended and
restated Plan incorporates previously adopted amendments since it was first adopted and adds
provisions deemed necessary or advisable to comply with Code section 409A and the regulations
thereunder. The purpose of the Plan is to provide a compensation program which will attract and
retain qualified individuals not employed by General Mills, Inc. and its subsidiaries (the
“Company”) to serve on the Board of Directors of the Company (the “Board”) and to further align the
interests of non-employee directors with those of the stockholders by providing that a portion of
compensation will be linked directly to increases in stockholder value.

2. EFFECTIVE DATE, DURATION OF PLAN

     This Plan shall become effective as of September 25, 2006 subject to the approval of the Plan
by the stockholders. The Plan will terminate on September 30, 2011 or such earlier date as
determined by the Board or the Compensation Committee of the Board (the “Committee”); provided that
no such termination shall affect rights earned or accrued under the Plan prior to the date of
termination.

3. DEFINITIONS

     Wherever used in this Plan, the following terms have the meanings set forth below:

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

     “Change of Control” has the meaning set forth in Section 11.

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

     “Committee” has the meaning set forth in Section 2.

     “Common Stock” means Company common stock ($.10 par value).

     “Company” means General Mills, Inc. and its subsidiaries.

     “Deferred Compensation Account” has the meaning set forth in Section 6(d).

     “Election Form” means a written form provided by the Committee pursuant to which a
Participant may elect the form and timing of distributions with respect to his or her retainer,
Stock Units and dividend equivalents under the Plan.

     “Fair Market Value” means the average of the intraday high and low price of the
national market composite price of the Common Stock on the applicable date. Notwithstanding this
definition, effective January 1, 2007, “Fair Market Value” means the closing price on the
New York Stock Exchange of the Common Stock on the applicable date.

     “Key Employee” means a Participant treated as a “specified employee” as of his
Separation from Service under Code section 409A(a)(2)(B)(i), i.e., a key employee (as defined in
Code section 416(i) without regard to paragraph (5) thereof) of the Company or its affiliates if
the Company’s or its affiliate’s stock is publicly traded on an established securities market or
otherwise. Key Employees shall be determined in accordance with Code section 409A using a December
31 identification date. A listing of Key Employees as of an identification date shall be effective
for the 12-month period beginning on the April 1 following the identification date.

     “Option” has the meaning set forth in Section 7(a).

     “Participant” has the meaning set forth in Section 4.

     “Plan” means the General Mills, Inc. 2006 Compensation Plan for Non-Employee Directors
as set forth herein and as amended.

     “Plan Year” has the meaning set forth in Section 6(a).

     “Separation from Service” or “Separate from Service” means a “separation from
service” within the meaning of Code section 409A.

 

 

     “Stock Unit Account” has the meaning set forth in Section 8(a).

     “Stock Units” has the meaning set forth in Section 8(a).

4. PARTICIPATION

     Each member of the Board who is not an employee of the Company at the date compensation is
earned or accrued shall be eligible to participate in the Plan unless prohibited from participating
by the terms of their employment (a “Participant”).

5. COMMON STOCK SUBJECT TO THE PLAN

     (a) General. The Common Stock to be issued under this Plan is to be made available
from the authorized but unissued Common Stock, shares of Common Stock held in the treasury, or
Common Stock purchased on the open market or otherwise. Subject to the provisions of the next
succeeding paragraphs, the maximum aggregate number of shares authorized to be issued under the
Plan shall be 700,000 and the maximum number of shares authorized to be issued under the Plan in a
single Plan Year shall be 160,000.

     Upon forfeiture or termination of Stock Units prior to vesting, the shares of Common Stock
subject thereto shall again be available for awards under the Plan.

     (b) Adjustments for Corporate Transactions. If a corporate transaction has occurred
affecting the Common Stock such that an adjustment to outstanding awards is required to preserve
(or prevent enlargement of) the benefits or potential benefits intended at the time of grant, then
in such manner as the Committee deems equitable, an appropriate adjustment shall be made to (i) the
number and kind of shares which may be awarded under the Plan; (ii) the number and kind of shares
subject to outstanding awards; (iii) the number of shares credited to a Stock Unit Account; and
(iv) the exercise price of outstanding Options provided that the number of shares of Common Stock
subject to any Option denominated in Common Stock shall always be a whole number. For this purpose
a corporate transaction includes, but is not limited to, any dividend or other distribution
(whether in the form of cash, Common Stock, securities of a subsidiary of the Company, other
securities or other property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to purchase Common Stock or
other securities of the Company, or other similar corporate transaction. Notwithstanding anything
in this Section to the contrary, an adjustment to an Option under this Section 5(b) shall be made
in a manner that will not result in the grant of a new Option under Code Section 409A.

6. RETAINER

     (a) General. Each non-employee director shall be entitled to receive a retainer with
respect to each one-year board term, beginning the day of each annual stockholders’ meeting and
ending the day before the succeeding annual stockholders’ meeting (the “Plan Year”) in an amount
determined from time to time by the Board. Retainers shall be earned and paid at the end of each of
the Company’s fiscal quarters.

     (b) Normal Payment Terms. The normal payment terms for retainers are cash in a lump
sum. In the absence of an affirmative election to the contrary, the retainer (or the portion not
subject to such elections) shall be paid 10 business days following the last day of each quarterly
period described above in (a).

     (c) Deferral Elections. Each Participant may elect an alternative form (lump sum vs.
installments) in which a retainer may be delivered and the timing for such delivery, pursuant to
the terms of Section 9. Participants shall make such election by filing an irrevocable Election
Form with the Committee before the calendar year in which a Plan Year begins. The election shall
apply to amounts earned in a quarterly period described in (a) above that begins during the Plan
Year. Notwithstanding the foregoing, in the first year in which a non-employee director becomes
eligible to participate in the Plan, an election may be made with respect to services to be
performed subsequent to the election, to the extent permitted under Code section 409A. Such an
election must be made on an Election Form within 30 days after the date the non-employee director
becomes eligible to participate in the Plan.

     (d) Deferred Cash Alternative. For each Participant who affirmatively elects to defer
receipt of his or her retainers in the form of deferred cash, the Company shall establish a
separate account (a “Deferred Compensation Account”) and credit such deferred cash compensation
into that Account as of the date the amounts would otherwise be paid. A separate Deferred
Compensation Account shall be established for each Plan Year a Participant makes such a deferral
election. Earnings, gains and losses shall be credited to each such Deferred Compensation Account
based on the rate earned by the fund or funds selected by the Participant from among funds or
portfolios established under the General Mills, Inc. 401(k) Savings Plan or any other qualified
benefit plan maintained by the Company which the Minor Amendment Committee, or its delegate, in its

- 2 -

 

discretion, may from time to time establish. Distributions from a Deferred Compensation Account
shall be made in accordance with Section 9.

     The Company has established a Supplemental Benefits Trust with Wells Fargo Bank Minnesota,
N.A. as trustee to hold assets of the Company under certain circumstances as a reserve for the
discharge of the Company’s obligations as to Deferred Compensation Accounts under the Plan and
certain other deferred compensation plans of the Company. In the event of a Change of Control, the
Company shall be obligated to immediately contribute such amounts to the trust as may be necessary
to fully fund all Deferred Compensation Accounts payable under the Plan. Any Participant in the
Plan shall have the right to demand and secure specific performance of this provision. All assets
held in the trust remain subject only to the claims of the Company’s general creditors whose claims
against the Company are not satisfied because of the Company’s bankruptcy or insolvency (as those
terms are defined in the trust agreement). No Participant has any preferred claim on, or beneficial
ownership interest in, any assets of the trust before the assets are paid to the Participant and
all rights created under the trust, as under the Plan, are unsecured contractual claims of the
Participant against the Company.

     (e) Common Stock Alternative. Each Participant may affirmatively elect to receive all
or a specified percentage of his or her retainers for a Plan Year in shares of Common Stock, which,
if elected, will be issued 10 business days following the last day of each quarterly period during
the Plan Year described above in (a). Only whole numbers of shares will be issued, with any
fractional share amounts paid in cash. For purposes of computing the number of shares earned each
quarter during the Plan Year, the value of each share shall be equal to the Fair Market Value on
the third Business Day preceding the last day of each quarter described above in (a) during the
Plan Year. For the purposes of this Plan, “Business Day” shall mean a day on which the New York
Stock Exchange is open for trading.

     (f) Death. Notwithstanding any other provision of the Plan, if a Participant dies
during a Plan Year, the balance of the amount due for the full quarter in which death occurs shall
be payable in full to the person(s) designated under the terms of Section 11(e) of this Plan or if
none designated then to the Participant’s estate, in cash, 60 days following the date of death.

7. NON-QUALIFIED STOCK OPTIONS

     (a) Grant of Options. Each non-employee director on the effective date of the Plan
(or, if first elected after the effective date of the Plan, on the date the non-employee director
first attends a Board meeting) shall be awarded an option (an “Option”) to purchase shares of
Common Stock, in an amount determined from time to time by the Board, or its delegate. As of the
close of business on each successive annual stockholders’ meeting after the date of the original
award, each Participant who is re-elected to the Board shall be granted an additional Option to
purchase shares of Common Stock. All Options granted under the Plan shall be non-statutory options
not entitled to special tax treatment under Code section 422.

     (b) Option Exercise Price. The per share price to be paid by the Participant at the
time an Option is exercised shall be 100% of the Fair Market Value on the date of grant, or on the
last date preceding the date of grant on which the Common Stock was traded.

     (c) Term of Option. Each Option shall expire ten (10) years from the date of grant.

     (d) Exercise and Vesting of Option. Each Option will vest on the date of the annual
stockholders’ meeting next following the date the Option is granted. Upon vesting, a Participant
shall be given the full ten (10) year term to exercise the Option without regard to whether he or
she continues to serve on the Board. If, for any reason, a Participant ceases to serve on the Board
prior to the date an Option vests, such Option shall be forfeited and all further rights of the
Participant to or with respect to such Option shall terminate. Notwithstanding the foregoing, if a
participant should die during his or her term of service on the Board, any vested Option may be
exercised by the person(s) designated under the terms of Section 11(e) of this Plan, and any
unvested Options shall fully vest and become exercisable upon death for the remainder of the
Option’s full term.

     (e) Method of Exercise. A Participant exercising an Option shall give notice to the
Company of such exercise and of the number of shares elected to be purchased prior to 4:30 P.M.
CST/CDT on the day of exercise, which must be a business day, at the executive offices of the
Company. The exercise price shall be paid to the Company at the time of such exercise, subject to
any applicable rule or regulation adopted by the Committee:

          (i) in cash (including check, draft, money order or wire transfer made payable to the order
of the Company);

          (ii) through the tender of shares of Common Stock owned by the Participant (by either actual
delivery or attestation); or

          (iii) by a combination of (i) and (ii) above.

- 3 -

 

To determine the amount of the payment, Common Stock delivered pursuant to (ii) or (iii) shall have
a value equal to the Fair Market Value of the Common Stock on the date of exercise.

     (f) Non-transferability. Except as provided by rule adopted by the Committee, an
Option shall be non-assignable and non-transferable by a Participant other than by will or the laws
of descent and distribution. A Participant shall forfeit any Option assigned or transferred,
voluntarily or involuntarily, other than as permitted under this subsection.

8. STOCK UNITS

     (a) Awards. On the effective date of the Plan (or, if a Participant is first elected
after the effective date of the Plan, on the date the Participant first attends a Board meeting)
and at the close of business on each successive annual stockholders’ meeting, each Participant
shall be awarded the right to receive shares of Common Stock (“Stock Units”), subject to vesting as
provided in Section 8(b). Only a Participant who is re-elected to the Board shall be entitled to a
grant under this Section 8(a) of Stock Units awarded at the close of business on an annual meeting
date after the date of the original grant to Participants. A separate Stock Unit Account will be
established for the Participant each time an award of Stock Units is made.

     The maximum aggregate number of shares authorized to be issued under the Plan upon vesting of
Stock Unit awards shall be 175,000. Participants receiving Stock Units will have no rights as
stockholders of the Company with respect to allocations made to their Stock Unit Account(s), except
the right to receive dividend equivalent allocations under Section 8(d).

     Stock Units may not be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of until such time as share certificates for Common Stock are issued to the Participants.

     (b) Vesting of Stock Units. A Participant’s interest in the Stock Units shall vest on
the date of the annual stockholders’ meeting next following the date of the award of the Stock
Units. If, for any reason, a Participant ceases to serve on the Board prior to the date the
Participant’s interest in a grant of Stock Units vests, such Stock Units shall be forfeited and all
further rights of the Participant to or with respect to such Stock Units shall terminate.
Notwithstanding the foregoing, a Participant who dies while serving on the Board prior to the
vesting of Stock Units shall fully vest in such Stock Units, effective as of the date of death and
shall be paid to the person(s) designated under the terms of Section 11(e) of this Plan.

     (c) Election Concerning Receipt of Common Stock. Each Participant receiving an award
of Stock Units under Section 8(a) may elect the time and form (lump sum vs. installments) of
distribution of Common Stock attributable to such
Stock Units, pursuant to the terms of Section 9. If no affirmative election is made, all Stock
Units shall be paid in shares of Common Stock 10 days following vesting.

     (d) Dividend Equivalents. The Participant may also elect to have dividend equivalents
payable on Stock Units paid currently in cash or reinvested in Stock Units. If the amounts are
reinvested, on each dividend payment date for the Common Stock, the Company will credit each Stock
Unit Account with an amount equal to the dividends that would have been paid had the Stock Units
been actual shares of Common Stock, which shall be used to “purchase” additional Stock Units at a
price equal to the Fair Market Value on the dividend date. Such additional Stock Units shall be
distributed at the same time and in the same form as the rest of the Stock Unit Account balance. If
the Participant fails to make an election, the dividend equivalent amounts shall be paid in cash
currently.

     (e) Timing of Elections. In order to make an election under Sections 8(c) and/or 8(d)
with respect to Stock Units awarded for a Plan Year, a Participant shall file an irrevocable
Election Form with the Committee before the calendar year in which the Plan Year begins.
Notwithstanding the foregoing, in the first year in which a non-employee director becomes eligible
to participate in the Plan, a deferral election may be made with respect to services to be
performed subsequent to the election, to the extent permitted under Code section 409A. Such an
election must be made on an Election Form within 30 days after the date the non-employee director
becomes eligible to participate in the Plan.

9. DISTRIBUTION PROVISIONS FOR DEFERRED CASH AND STOCK UNITS

     The following distribution provisions shall apply to Deferred Compensation Accounts and Stock
Unit Accounts:

     (a) Timing. Distributions from Deferred Compensation Accounts shall normally commence
at Separation from Service, however, a Participant may affirmatively elect a specified date for
commencement, provided said date is not later than age 75. The same rule applies to Stock Units
which have been deferred beyond the vesting period described in Section 8(b). Elections as to the
timing of benefit commencement shall be made in accordance with Sections 6 and 8, as appropriate.

     Notwithstanding the above or any other provision of this Plan, distributions may not be made
to a Key Employee upon a Separation from Service before the date which is six months after the date
of the Key Employee’s Separation from Service (or, if earlier, the date of death of the Key
Employee). Any payments that would otherwise be made during this period of delay shall

- 4 -

 

be accumulated and paid on the first day of the seventh month following the Participant’s Separation
from Service (or, if earlier, the first day of the month after the Participant’s death).

     (b) Form of Distribution. Distributions shall normally be made in a lump sum.
However, a Participant may affirmatively elect to receive substantially equal annual installments
over a period of up to 10 years. Such elections shall be made in accordance with Sections 6 and 8,
as appropriate.

     (c) Manner of Distribution. Amounts credited to Deferred Compensation Accounts shall
be paid in cash. Amounts credited to Stock Unit Accounts shall be paid in Common Stock based on the
number of Stock Units credited to the Stock Unit Account and paid in cash equal to any dividend
equivalent amounts which had not been used to “purchase” additional Stock Units.

     (d) Distribution Upon Death. Notwithstanding any elections by a Participant or
provisions of the Plan to the contrary, if a Participant dies before full distribution of a
Deferred Compensation Account or Stock Unit Account, such accounts shall be distributed to the
person(s) designated under the terms of Section 11(e) of this Plan or if none designated then to
the Participant’s estate in a lump sum 60 days following the date of death.

     (e) Permitted Payment Delay To Avoid Violations of Law. Notwithstanding any provision
of this Plan to the contrary, any distribution to a Participant under the Plan shall be delayed
upon the Committee’s reasonable anticipation that the making of the payment would violate Federal
securities laws or other applicable law; provided, that any payment delayed pursuant to this
Section 9(e) shall ultimately be paid in accordance with Code section 409A.

     (f) Payment Acceleration. If amounts deferred under the Plan must be included in a
Participant’s income under Code section 409A prior to the scheduled distribution of such amounts,
distribution of such amount shall be made immediately to the Participant.

10. CHANGE OF CONTROL

     Notwithstanding any elections by a Participant or provisions of the Plan to the contrary, upon
the occurrence of a Change of Control, all Options and Stock Units shall fully and immediately
vest, and shall be exercisable or paid pursuant to the terms of the Plan that are otherwise
applicable. If the Change of Control is also a “change in control” as defined under Code section
409A(a)(2)(A)(v) and official guidance thereunder, all Stock Unit Accounts shall be distributed in
a single payment 30 days following such Change of Control.

11. ADMINISTRATION

     The Plan shall be administered by the Committee. The Committee shall have full power to
interpret the Plan, formulate additional details and regulations for carrying out the Plan and
amend, modify or terminate the Plan as from time to time it deems proper and in the best interests
of the Company, provided that after a Change of Control no amendment, modification of or action to
terminate the Plan may be made which would affect compensation earned or accrued prior to such
amendment, modification or termination without the written consent of a majority of Participants
determined as of the day before a Change of Control. Any decision or interpretation adopted by the
Committee shall be final and conclusive. A “Change of Control” means:

     (a) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act)
of voting securities of the Company where such acquisition causes such Person to own 20% or more of
the combined voting power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (1), the following acquisitions shall not be deemed
to result in a Change of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction that complies with clauses (i), (ii) and
(iii) of subsection (3) below; and provided, further, that if any Person’s beneficial ownership of
the Outstanding Company Voting Securities reaches or exceeds 20% as a result of a transaction
described in clause (i) or (ii) above, and such Person subsequently acquires beneficial ownership
of additional voting securities of the Company, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20% or more of the Outstanding Company Voting
Securities; or

     (b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an

- 5 -

 

actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

     (c) Consummation of a reorganization, merger, statutory share exchange or consolidation or
similar transaction involving the Company or any of its subsidiaries, sale or other disposition of
all or substantially all of the assets of the Company, or the acquisition of assets or stock of
another entity by the Company or any of its subsidiaries, (each a “Business Combination”);
excluding, however, such a Business Combination pursuant to which (i) all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, immediately prior to such
Business combination of the Outstanding Company Voting Securities, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business Combination; or

     (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

     (e) Designation of Beneficiary. Each Participant who has a Deferred Compensation
Account, a Stock Unit Account, or Option under the Plan may designate a beneficiary or
beneficiaries to exercise any Option or to receive any payment which under the terms of the Plan
may become exercisable or payable on or after the Participant’s death. At any time, and from time
to time, any such designation may be changed or cancelled by the Participant without the consent of
any such beneficiary. Any such designation, change or cancellation must be on a form provided for
that purpose by the Committee and shall not be effective until received by the Committee. Such
form may establish other rules as the Committee deems appropriate. If no beneficiary has been
properly designated by a deceased Participant, or if all the designated beneficiaries have
predeceased the Participant, the beneficiary shall be the Participant’s estate. If the Participant
designates more than one beneficiary, any Options shall be divided among beneficiaries equally, and
any payments under the Plan to such beneficiaries shall be made in equal shares, unless the
Participant has expressly designated otherwise, in which case such Options shall be divided, and
the payments shall be made, in the portions designated by the Participant.

12. GOVERNING LAW

     The validity, construction and effect of the Plan and any such actions taken under or relating
to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable
Federal law.

13. NOTICES

     Unless otherwise notified, all notices under this Plan shall be sent in writing to the
Company, attention Corporate Compensation, P.O. Box 1113, Minneapolis, Minnesota 55440. All
correspondence to the Participants shall be sent to the address which is their recorded address as
listed on the election forms.

14. PLAN TERMINATION

     Upon termination of the Plan, distribution of Deferred Compensation Accounts and Stock Unit
Accounts shall be made as described in Section 9, unless the Committee determines in its sole
discretion that all such amounts shall be distributed upon termination in accordance with the
requirements under Code section 409A.Upon termination of the Plan, no further deferrals of
retainers, Stock Units or dividend equivalent amounts shall be permitted; however, earnings, gains
and losses shall continue to be credited to the Deferred Compensation Account balances in
accordance with Section 6 until the Deferred Compensation Account balances are fully distributed.

15. COMPLIANCE WITH CODE SECTION 409A

     It is intended that this Plan shall comply with the provisions of Code section 409A and the
Treasury regulations relating thereto so as not to subject the Participants to the payment of
additional taxes and interest under Code section 409A. In furtherance of this intent, this Plan
shall be interpreted, operated and administered in a manner consistent with these intentions.

- 6 -

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