Document:

Exhibit 4.5(b)

 

Schedule identifying omitted documents and
setting forth the differences

between the omitted documents and Exhibit 4.2(a) to this Report on Form 8-K

 

This schedule
identifies certain documents omitted from this Report on Form 8-K (the “Omitted
Documents”) and the differences between the Omitted Documents and Exhibit
4.5(a) to this Report on Form 8-K (“Exhibit 4.5(a)”).

 

For purposes
of this Exhibit 4.5(b), the following terms are referred to herein as the “Variable
Terms”.

 

Name of the
Trust:

Party
Executing Selling Agent Agreement (in the case of an issuance of InterNotes®):
Incapital, unless otherwise specified in the Pricing Supplement

Party
Executing Distribution Agreement (in the case of an issuance of medium-term
notes): Lehman Brothers Inc., unless otherwise specified in the Pricing
Supplement

 

Schedule I:

 

If the Selling Agent Agreement is executed:

Selling Agent Agreement Specifications

In connection
with Section VI(a)(viii) of the Selling Agent Agreement, the Program under
which the Notes are issued, as well as the Notes, have been assigned the
ratings issued by Moody’s and S&P set forth in the Pricing Supplement. In
connection with Section VI(b)(xiv) of the Selling Agent Agreement, the Company
has been assigned the financial strength rating by Moody’s and S&P as set
forth in the Pricing Supplement.

In connection
with Section X of the Selling Agent Agreement, the notice information for the
Agents is as follows (unless otherwise specified in the pricing supplement):

c/o Incapital
LLC

One North LaSalle Street, Suite 3500

Chicago, Illinois 60602

 

If the Distribution Agreement is executed:

Distribution Agreement Specifications

In connection
with Section 2(a)(viii) of the Distribution Agreement, the Program under which
the Notes are issued, as well as the Notes, have been assigned the ratings
issued by Moody’s and by S&P set forth in the Pricing Supplement. In
connection with Section 2(b)(xiv) of the Distribution Agreement, the Company
has been assigned the financial strength rating by Moody’s and S&P set
forth in the Pricing Supplement.

 

In connection
with Article 2 of the Distribution Agreement, the notice information for the
Dealer(s) is as follows (unless otherwise specified in the pricing supplement):

 

Lehman
Brothers Inc.

745 Seventh Avenue

New York, NY 10019

 

Attn: Medium
Term Note Desk

Telecopy No.:  212 526 0943

 

1.
Omitted Document 1: 
Omnibus Instrument relating to the 5.55% Callable InterNotes® due March
15, 2014 (the “Notes”) of Protective Life Secured Trust 2006-3

 

Differences:

 

The Variable
Terms of the omnibus instrument represented by Omitted Document 1 differ from
the terms set forth in Exhibit 4.5(a) as and to the extent the terms set forth
in the Pricing Supplement filed by Protective Life Insurance Company with the
Securities and Exchange Commission pursuant to Rule 424(b) of the rules and
regulations of the SEC under the Securities Act of 1933, as amended, with
respect to the Notes, differ from the analogous terms set forth in Exhibit
4.5(a).

 

2.
Omitted Document 2: 
Omnibus Instrument relating to the 5.55% Callable InterNotes® due March
15, 2015 (the “Notes”) of Protective Life Secured Trust 2006-4

 

Differences:

 

The Variable
Terms of the omnibus instrument represented by Omitted Document 2 differ from
the terms set forth in Exhibit 4.5(a) as and to the extent the terms set forth
in the Pricing Supplement filed by Protective Life Insurance Company with the
Securities and Exchange Commission pursuant to Rule 424(b) of the rules and
regulations of the SEC under the Securities Act of 1933, as amended, with
respect to the Notes, differ from the analogous terms set forth in Exhibit
4.5(a).

 

3.
Omitted Document 3: 
Omnibus Instrument relating to the 5.5% Callable InterNotes® due March
15, 2012 (the “Notes”) of Protective Life Secured Trust 2006-5

 

Differences:

 

The Variable
Terms of the omnibus instrument represented by Omitted Document 3 differ from
the terms set forth in Exhibit 4.5(a) as and to the extent the terms set forth
in the Pricing Supplement filed by Protective Life Insurance Company with the
Securities and Exchange Commission pursuant to Rule 424(b) of the rules and
regulations of the SEC under the Securities Act of 1933, as amended, with
respect to the Notes, differ from the analogous terms set forth in Exhibit 4.5(a).

 

4.
Omitted Document 4: 
Omnibus Instrument relating to the 5.75% Callable InterNotes® due April
15, 2016 (the “Notes”) of Protective Life Secured Trust 2006-6

 

 

Differences:

 

The Variable
Terms of the omnibus instrument represented by Omitted Document 4 differ from
the terms set forth in Exhibit 4.5(a) as and to the extent the terms set forth
in the Pricing Supplement filed by Protective Life Insurance Company with the
Securities and Exchange Commission pursuant to Rule 424(b) of the rules and
regulations of the SEC under the Securities Act of 1933, as amended, with
respect to the Notes, differ from the analogous terms set forth in Exhibit
4.5(a).Exhibit 10.1

 

VITAL IMAGES, INC.

2006 LONG-TERM INCENTIVE PLAN

 

Effective Date:  March
9, 2006

 

 

Table of Contents

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.   Purpose
  of the Plan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.   Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.   Shares Subject to the Plan

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  4.   Administration

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  5.   Term
  of Plan

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  6.   Terms and Conditions of Qualified Options

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  7.   Terms
  and Conditions of Non-Qualified Options

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  8.   Automatic Grants of Director Options to Non-employee Directors

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  9.   Terms
  and Conditions of Stock Appreciation Rights

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  10.   Awards
  of Restricted Stock

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  11.   Other
  Awards

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  12.  Performance-Based
  Awards

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  13.  Adjustments
  Upon Certain Events

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  14.  Shares
  Acquired for Investment

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  15.  No
  Right to Employment, Service as a Director or Awards

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  16.  Other
  Benefit and Compensation Programs

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  17.  Successors
  and Assigns

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  18.  Nontransferability
  of Awards; Designation of Beneficiary

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  19.  Amendments
  or Termination

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  20.  International
  Participants

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  21.  General

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  22.  Effective
  Date

  	
   

  	
  29

  

 

ii

 

1.                                      Purpose of the Plan

 

The purpose of
the Plan is to aid the Company and its Affiliates in recruiting and retaining
employees, directors, independent contractors and other service providers to
the Company and to motivate such employees, directors, independent contractors
and other service providers to exert their best efforts on behalf of the
Company and its Affiliates by providing incentives through the granting of
Awards.  The Company expects that it will
benefit from the stock ownership opportunities and other benefits provided to
such Participants under this Plan to encourage alignment of their interest in
the Company’s success with that of other stakeholders.

 

2.                                       Definitions

 

The following capitalized
terms used in the Plan have the respective meanings set forth in this Section;
other terms are defined elsewhere in the Plan:

 

(a)                                  “Affiliate” means a
Parent or Subsidiary.

 

(b)                                 “Award” means an
Option, Stock Appreciation Right, Share of Restricted Stock, Other Stock-Based
Award or Other Cash-Based Award granted pursuant to the Plan.

 

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

 

(d)                                 “Cause” (as
determined by the Committee) means “cause” (or a similar term) as defined in
any employment or other agreement or policy applicable to the Participant or,
if no such agreement or policy exists, means (i) dishonesty, fraud,
misrepresentation, embezzlement or deliberate injury or attempted injury, in
each case related to the Company or any Affiliate, (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 non-compete
agreement entered into with the Company or any Affiliate.

 

(e)                                  “Code” means the
Internal Revenue Code of 1986, as amended, or any successor thereto.

 

(f)                                    “Committee” means the
Compensation Committee of the Board or, if the Board has not appointed a
separate Compensation Committee, the entire Board.

 

(g)                                 “Common Stock” means
the Company’s common stock, $0.01 par value per share.

 

(h)                                 “Company” means Vital
Images, Inc., a Minnesota corporation.

 

(i)                                     “Continuous Status as a Director”
means the absence of any interruption or termination of service as a
Director.  If the leave of absence is
approved by the

 

 

Committee,
Continuous Status as a Director shall not be considered as interrupted in the
case of sick leave, military leave, or any other leave of absence.

 

(j)                                     “Director” means a
member of the Board of Directors of the Company.

 

(k)                                  “Director Option”
means a Non-Qualified Option granted to a Director pursuant to Section 8.

 

(l)                                     “Disability” means
the disability of the Participant such as would entitle the Participant to
receive disability income benefits pursuant to the long-term disability plan of
the Company or any Affiliate covering the Participant or, if no such plan
exists or is applicable to the Participant, the permanent and total disability
of the Participant within the meaning of Section 22(e)(3) of the Code.

 

(m)                               “Employee” means any
person, including officers and Directors, employed by the Company or any
Subsidiary.  The payment to a Director by
the Company of directors’ fees shall not be sufficient to constitute employment
by the Company.

 

(n)                                 “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

 

(o)                                 “Exercise Price” means the purchase price per Share under
the terms of an Option.

 

(p)                                 “Fair Market Value” means,
on a given date, (i) if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange, the average of the
closing sales prices of the Common Stock on the end of any day on all national
securities exchanges on which the Common Stock may at the time be listed or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day or, (ii) if the Common Stock is not so listed or admitted but transactions
in the Common Stock are reported on The Nasdaq Stock Market, the closing price
quoted on The Nasdaq Stock Market on such day, or (iii) if the Common Stock is
not so listed or admitted to unlisted trading privileges or quoted on The
Nasdaq Stock Market, and bid and asked prices therefor in the domestic
over-the-counter market are reported by Pink Sheets LLC (or any comparable
reporting service), the average of the closing bid and asked prices on such day
as reported by Pink Sheets LLC (or any comparable reporting service), or (iv)
if the Common Stock is not listed on any national securities exchange or quoted
on The Nasdaq Stock Market or in the domestic over-the-counter market, the fair
value of the Common Stock determined by the Committee in good faith in the
exercise of its reasonable discretion.

 

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

 

(r)                                    “Non-Qualified Option”
means a stock option granted pursuant to Section 7 that does not qualify
as an incentive stock option as defined in Section 422 of the Code.

 

(s)                                  “Option” means a
Qualified Option or a Non-Qualified Option (including a Director Option).

 

2

 

(t)                                    “Other Stock-Based Awards” means
Awards granted pursuant to Section 11(a) or Section 12.

 

(u)                                 “Other Cash-Based
Awards” means Awards granted pursuant to Section 11(b) or
Section 12.

 

(v)                                 “Parent” means any “parent
corporation” of the Company, as such term is defined in Section 424(e) of the
Code or any successor provision.  The
term shall include any Parent which becomes such after adoption of the Plan.

 

(w)                               “Participant” means
an employee of the Company or an Affiliate who is selected by the Committee to
participate in the Plan; a Director of the Company who receives Director
Options or other Awards under the Plan; or any consultant, agent, advisor or
independent contractor who is selected by the Committee to participate in the
Plan and who renders bona fide services to the Company or an Affiliate that
(i) are not in connection with the offer and sale of the Company’s
securities in a capital-raising transaction and (ii) do not directly or
indirectly promote or maintain a market for the Company’s securities.  Except where the context otherwise requires,
references in this Plan to “employment” and related terms shall apply to
services in any such capacity.

 

(x)                                   “Performance-Based Awards” means
Options, Awards of Restricted Stock, Other Stock-Based Awards and Other
Cash-Based Awards granted pursuant to Section 12.

 

(y)                                 “Plan” means this Vital Images, Inc. 2006
Long-Term Incentive Plan, as amended or supplemented from time to time.

 

(z)                                   “Qualified Option”
means a stock option granted pursuant to Section 6 that is intended to
qualify as an incentive stock option under Section 422 of the Code.

 

(aa)                            “Restricted Stock” means
any shares of Common Stock granted under Section 10.

 

(bb)                          “Stock Appreciation Right” means
a stock appreciation right granted pursuant to Section 9.

 

(cc)                            “Subsidiary” means any “subsidiary corporation” of the
Company, as such term is defined in Section 424(f) of the Code.  The term shall include any Subsidiary which
becomes such after adoption of the Plan.

 

3.                                      Shares Subject to
the Plan

 

(a)                                  Number of Shares.  The total number of shares of Common Stock
which may be issued under the Plan is 900,000 shares.  The full number of shares of Common Stock
available under the Plan may be used for any Option or other type of
Award.  The aggregate number of shares of
Common Stock available under the Plan shall be subject to adjustment upon the
occurrence of any of the events and in the manner set forth in Section 13.  Any shares of Common Stock subject to Awards,
other than Awards of Restricted Stock, shall be counted against the numerical
limits of this Section 3(a) as one share of Common Stock for every share of
Common Stock subject to such Award.  However, any share of Common

 

3

 

Stock subject
to an Award of Restricted Stock shall be counted against the numerical limits
of this Section 3(a) as two shares of Common Stock for every one share of
Common Stock subject to the Award of Restricted Stock.  To the extent that
a share of Common Stock that was subject to an Award of Restricted Stock that
counted as two shares of Common Stock against the numerical limits of this
Section 3(a) pursuant to the preceding sentence is recycled back into the Plan
under Section 3(b), the Plan shall be credited with two shares of Common Stock.

 

(b)                                 Treatment of Reacquired and Other
Shares.  If all or any
portion of an Option or Stock Appreciation Right expires or is terminated,
surrendered or cancelled without having been fully exercised, if all or any
portion of an Award of Restricted Stock is forfeited to or repurchased by the
Company, or if any other grant of an Award results in any shares of Common
Stock not being issued or being forfeited to or repurchased by the Company, the
unpurchased, forfeited, repurchased or reacquired shares of Common Stock
covered by such Award shall again be available for the grant of Awards under
the Plan.  With respect to Stock Appreciation
Rights, when a stock-settled Stock Appreciation Right is exercised, the shares
of Common Stock subject to the Stock Appreciation Right grant agreement shall
be counted against the numerical limits of Section 3(a) above as one share for
every share subject thereto, regardless of the number of shares of Common Stock
used to settle the Stock Appreciation Right upon exercise.  Shares of Common Stock that have actually
been issued under the Plan under any Award shall not be returned to the Plan
and shall not become available for future distribution under the Plan;
provided, however, that if shares of Common Stock subject to an Award of
Restricted Stock or any other Award are repurchased by the Company at their
original purchase price or are forfeited to the Company, such shares shall
become available for future grant under the Plan.  Shares of Common Stock
used to pay the exercise price of an Option shall not become available for
future grant or sale under the Plan.  Shares used to satisfy tax
withholding obligations shall not become available for future grant or sale
under the Plan.  To the extent an Award under the Plan is paid out in cash
rather than shares of Common Stock, such cash payment shall not reduce the
number of Shares available for issuance under the Plan.  Any payout of
dividends or dividend equivalents with respect to an Award, because they are
payable only in cash, shall not reduce the number of shares of Common Stock
available under Section 3(a) for issuance under the Plan, and any forfeiture of
dividend or dividend equivalents shall not increase the number of shares
available under Section 3(a) for issuance under the Plan.  No fractional shares of Common Stock will be
issued under the Plan, but instead any fractional Share will be rounded
downward to the next lowest whole Share.

 

4.                                      Administration

 

(a)                                  Delegation of Authority.  The Plan shall be administered by the
Committee.  The Committee shall consist
of the Board, unless the Board appoints a Committee consisting of at least
three but fewer than all the members of the Board.  If the Committee does not consist of the
entire Board, the Committee’s members shall serve at the pleasure of the Board,
which may from time to time appoint members

 

4

 

in
substitution for members previously appointed and fill vacancies, however
caused, in the Committee.  The Committee
may select one of its members as its Chairperson and shall hold its meetings at
such times and places as it may determine. 
A majority of the Committee’s members shall constitute a quorum.  All determinations of the Committee made at a
meeting in which a quorum is present shall be made by a majority of its members
present at the meeting.  Any decision or
determination of the Committee reduced to writing and signed by a majority of
the members shall be fully as effective as if it had been made by a majority
vote at a meeting duly called and held.

 

(b)                                 Authority
of Committee.  The Committee shall have exclusive power to
make Awards and to determine when and to whom Awards shall be granted, and the
form, amount and other terms and conditions of each Award, subject to the
provisions of this Plan and any applicable law or regulation.  The Committee may determine whether, to what
extent and under what circumstances Awards may be settled, paid or exercised in
cash, shares of Common Stock or
other Awards or other property, or cancelled, forfeited or suspended.  The Committee shall have the authority to
interpret this Plan and any Award or agreement made under this Plan, to
establish, amend, waive and rescind any rules and regulations relating to the
administration of this Plan, to determine the terms and provisions of any
agreements entered into hereunder (not inconsistent with this Plan), and to
make all other determinations necessary or advisable for the administration of
this Plan.  The Committee may correct any
defect, supply any omission or reconcile any inconsistency in this Plan or in
any Award or agreement in the manner and to the extent it shall deem
desirable.  The determinations of the
Committee in the administration of this Plan, as described herein, shall be
final, binding and conclusive.

 

(c)                                  Indemnification.  To
the full extent permitted by law, each member and former member of the
Committee and each person to whom the Committee delegates or has delegated
authority under this Plan shall be entitled to indemnification by the Company
against and from any loss, liability, judgment, damages, cost and reasonable
expense incurred by such member, former member or other person by reason of any
action taken, failure to act or determination made in good faith under or with
respect to this Plan.

 

(d)                                 Tax Withholding.  The Committee shall have the right to require
payment by a Participant of any amount it may determine to be necessary to withhold
for federal, state, local, non-U.S. income, payroll or other taxes
(collectively, the “Taxes”) as a result of the exercise, grant or vesting of an
Award.  The Participant may pay a portion
or all of such Taxes by delivering shares of Common Stock to the Company or
having the Company withhold shares of Common Stock, including shares of
Restricted Stock, with a Fair Market Value or cash equal to the amount of such
Taxes that would have otherwise been payable by the Participant.  If a Participant does not notify the Company
before the date of exercise, grant or vesting of an Award that will result in
Taxes being due from the Participant as to how the Participant intends to pay
such Taxes, the Company may, in its sole discretion, (i) withhold shares of Common
Stock subject to the Award with a Fair Market Value sufficient to pay such
Taxes and/or (ii) require

 

5

 

the payment by
the Participant of such Taxes in cash before delivering to the Participant the
shares of Common Stock subject to the Award.

 

(e)                                  Deferral.  In the discretion of the Committee, in
accordance with any procedures established by the Committee and consistent with
the provisions of Section 162(m) of the Code when applied to Participants
who may be “covered employees” thereunder, a Participant may be permitted to
defer the issuance of shares of Common Stock or cash deliverable upon the
exercise of an Option or Stock Appreciation Right, vesting of Restricted Stock,
or satisfaction of Other Stock-Based Awards or Other Cash-Based Awards, for a
specified period or until a specified date, but not beyond the expiration of
the term of such Option, Stock Appreciation Right, Restricted Stock grant, or
other Award.

 

(f)                                    Dividends or Dividend Equivalents.  If the Committee so determines, any Award
granted under the Plan may be credited with dividends or dividend equivalents
paid with respect to any underlying shares of Common Stock.  The Committee may apply any restrictions to
the dividends or dividend equivalents that the Committee deems appropriate and
may determine the form of payment, including cash, shares of Common Stock,
Restricted Stock or otherwise.

 

5.                                      Term of Plan

 

This Plan
shall commence on March 9, 2006 (the “Effective Date”) and shall terminate on
March 9, 2016 or at such earlier date as the Board of Directors shall
determine.  The termination of this Plan
shall not affect any Awards then outstanding under the Plan.  No Award may be granted under the Plan after
March 9, 2016.

 

6.                                      Terms
and Conditions of Qualified Options

 

Options
granted under the Plan may be Qualified Options.  When the Committee approves a grant of a
Qualified Option to a Participant, it shall prepare or cause to be prepared an
option agreement (“Qualified Option Agreement”) setting forth the terms of the
Qualified Option, and such Qualified Option Agreement shall be signed on behalf
of the Company and by the Participant. 
Qualified Options granted under this Plan shall be subject to the foregoing
and to the following terms and conditions and to such other terms and
conditions, not inconsistent therewith, as the Committee shall determine:

 

(a)                                  Number of Shares and Exercise Price.  The Qualified Option Agreement shall state
the total number of shares of Common Stock subject to the Qualified Option it
evidences, the Exercise Price per share of Common Stock, and the other terms of
the Qualified Option.  The Exercise Price
of any Qualified Option shall be equal to or greater than Fair Market Value.  The number of shares of Common Stock subject
to the Qualified Option and the Exercise Price shall be adjustable as provided
in Section 12(a) of this Plan.  Qualified
Option Agreements may be electronically delivered by the Company to the
Participant under this provision.

 

(b)                                 Exercisability; Term.  Qualified Options granted under the Plan
shall be exercisable at such time(s) and upon such terms and conditions as may
be determined by the Committee.  However,
subject to Section 6(n), a Qualified Option shall not be exercisable more than
five (5) years after the date it is granted.

 

6

 

The period
during which a Qualified Option may be exercised once it is granted may not be
reduced, except as provided in Sections 6(e), (f) and (g) of this Plan.

 

(c)                                  Exercise of Qualified Options.  Except as otherwise provided in the
applicable Qualified Option Agreement, a Qualified Option may be exercised for
all, or from time to time any part, of the shares of Common Stock for which it
is then exercisable.  For purposes of
this Section 6, the exercise date of a Qualified Option shall be the date a
written or electronic notice of exercise and full payment of the purchase price
are received by the Company in accordance with this Section 6(c) and Section
6(d) below.  The purchase price for the
shares of Common Stock as to which a Qualified Option is exercised shall be
paid to the Company in cash or its equivalent, such as by check or wire
transfer, or, if provided in the Qualified Option Agreement or with the consent
of the Committee:  (i) in shares of
Common Stock having a Fair Market Value equal to the aggregate Exercise Price
of the shares of Common Stock being purchased and satisfying such other
requirements as may be imposed by the Committee; provided, that such shares
were then purchased on the open market or have been held by the Participant for
at least six months (or such other period as established from time to time by
the Committee in order to avoid adverse accounting treatment under generally
accepted accounting principles); (ii) partly in cash and partly in such shares;
or (iii) if there is a public market for the shares of Common Stock at such
time, through the delivery of irrevocable instructions to a broker to sell
shares of Common Stock obtained upon the exercise of the Qualified Option and
to deliver promptly to the Company an amount out of the proceeds of such sale
equal to the aggregate Exercise Price for the shares being purchased.

 

(d)                                 Manner of Exercise of Qualified
Options.  A Qualified
Option shall be exercised only by the Participant (i) delivering a completed
and signed written or electronic notice of exercise to the Company in the form
prescribed by the Company specifying the number of shares of Common Stock as to
which the Qualified Option is being exercised; (ii) delivering the original
Qualified Option Agreement to the Company; and (iii) paying to the Company the
full amount of the Exercise Price for the number of shares of Common Stock with
respect to which the Qualified Option is being exercised as provided in Section
6(c) above.  When shares of Common Stock
are issued to the Participant upon the exercise of that Participant’s Qualified
Option, the fact of such issuance shall be noted on the Qualified Option
Agreement by the Company before the Qualified Option Agreement is returned to
the Participant.  When all shares of
Common Stock covered by the Qualified Option Agreement have been issued by the
Company to the Participant or when the Qualified Option expires, the
Participant shall deliver the Qualified Option Agreement to the Company, which
shall cancel it.  After the receipt by
the Company of the written or electronic notice of exercise and payment in full
of the Exercise Price in accordance with Sections 6(c) and 6(d), the Company
shall deliver or cause to be delivered to the Participant exercising the
Qualified Option stock certificates evidencing the number of shares with
respect to which the Qualified Option has been exercised, issued in the
Participant’s name; provided, however, that such delivery shall be deemed
effective for all purposes when the Company or its stock transfer agent (if
any) has deposited such stock certificates in the United States mail, postage
prepaid,

 

7

 

addressed to
the Participant at the address specified in the written or electronic notice of
exercise.  Qualified Option Agreements
may be electronically delivered by the Participant to the Company under this
provision.

 

(e)                                  Termination of Employment or
Service.  If a Participant
who holds a Qualified Option shall cease to be employed by or performing
services for the Company or any Affiliate for any reason other than death or
Disability, unless the applicable Qualified Option Agreement provides
otherwise, such Qualified Option shall immediately and automatically terminate
and be forfeited, whether or not exercisable, and neither such Participant nor
any of the Participant’s heirs, personal representatives, successors or assigns
shall have any rights with respect to such Qualified Option; provided, however,
that if such termination is due to any reason other than termination by the
Company or any Affiliate for Cause, all outstanding Qualified Options then held
by such Participant will remain exercisable to the extent they were exercisable
as of such termination for a period of three (3) months after such termination
(but in no event after the expiration date of any such Qualified Option).  Unless the applicable Qualified Option
Agreement provides otherwise, if an independent contractor or other
non-employment relationship between the Participant and the Company or an
Affiliate is terminated due to the commencement of an employment relationship
with the Company or an Affiliate, or if an employment relationship between the
Participant and the Company or an Affiliate is terminated due to the
commencement of an independent contractor or other non-employment relationship
with the Company or an Affiliate, such change in status shall be a termination
of employment or service under this Section 6(e).

 

(f)                                    Death or Disability of Participant.  Unless otherwise provided in the applicable
Qualified Option Agreement, if a Participant who is a natural person shall
cease to be employed by or performing services for the Company or any Affiliate
as a result of the Participant’s death or Disability, any Qualified Option held
by such Participant will become immediately exercisable in full and will remain
exercisable for a period of one (1) year after the date of termination, but in
no case later than the expiration date of such Qualified Option.  Upon the death of a Participant, and
Qualified Option held by such Participant may be exercised pursuant to Sections
6(c) and (d) of this Plan only by the person or persons to whom the Participant’s
rights under the Qualified Option shall pass by will or the laws of descent and
distribution.

 

(g)                                 Modification of Rights Upon
Termination. 
Notwithstanding the other provisions of this Section 6, upon a
Participant’s termination of employment or other service with the Company and
all Affiliates, the Committee may, in its sole discretion (which may be
exercised at any time on or after the date of grant, including following such
termination), cause Qualified Options (or any part thereof) then held by such
Participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however, that no Qualified
Option may remain exercisable beyond its expiration date.

 

(h)                                 Breach of Confidentiality or
Non-compete Agreements. 
Notwithstanding anything in the Plan to the contrary, if a Participant
materially breaches the terms of any

 

8

 

confidentiality
or non-compete agreement entered into with the Company or any Affiliate,
whether such breach occurs before or after termination of such Participant’s
employment or other service with the Company or any Affiliate, the Committee,
in its sole discretion, may immediately terminate all rights of the Participant
under the Plan and any agreements evidencing a Qualified Option then held by
the Participant without notice of any kind.

 

(i)                                     Date of Termination of Employment or
Other Service.  Unless the
Committee otherwise determines in its sole discretion, a Participant’s
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the
Company or the Affiliate for which the Participant provides employment or other
service, as determined by the Committee in its sole discretion based upon such
records.

 

(j)                                     No Obligation to Exercise Qualified
Option.  The grant of a
Qualified Option under the Plan shall impose no obligation on the Participant
to exercise such Qualified Option.

 

(k)                                  Eligible Recipients.  Qualified Options may be granted only to
persons who are employees of the Company or an Affiliate.

 

(l)                                     Exercise Price.  Subject to the provisions of Section 6(n),
the exercise price of shares of Common Stock that are subject to a Qualified
Option shall not be less than 100% of the Fair Market Value of such shares at
the time the Qualified Option is granted, as determined in good faith by the
Committee.

 

(m)                               Limit on Exercisability.  The aggregate Fair Market Value (determined
at the time the Qualified Option is granted) of the shares of Common Stock with
respect to which Qualified Options are exercisable by the Participant for the
first time during any calendar year, under this Plan or any other plan of the
Company or any Affiliate, shall not exceed $100,000.  To the extent a Qualified Option exceeds this
$100,000 limit, the portion of the Qualified Option in excess of such limit
shall be deemed a Non-Qualified Option.

 

(n)                                 Restrictions for Certain
Shareholders.  The
purchase price of shares of Common Stock that are subject to a Qualified Option
granted to an employee of the Company or any Affiliate who, at the time such
Qualified Option is granted, owns 10% or more of the total combined voting
power of all classes of stock of the Company or of any Affiliate, shall not be
less than 110% of the Fair Market Value of such shares on the date such
Qualified Option is granted, and such Qualified Option may not be exercisable
more than five (5) years after the date on which it is granted.  For the purposes of this subparagraph, the
rules of Section 424(d) of the Code shall apply in determining the stock
ownership of any employee of the Company or any Affiliate.

 

(o)                                 Limits on Transferability and Exercise
of Qualified Options.  In
addition to any other restriction or limitations on transfer set forth in this
Plan or in the applicable Qualified Option Agreement, Qualified Options shall
not be transferable except by will or the laws of descent and distribution, and
Qualified Options shall be exercisable during a Participant’s lifetime only by
such Participant.

 

9

 

(p)                                 Effect of Not Meeting Qualified
Option Requirements. 
Subject to the discretion of the Committee to provide otherwise, if the
terms of a Qualified Option do not meet any requirements of this Plan or the
Code necessary to be treated as a Qualified Option under the Code, such
Qualified Option shall not terminate but shall be a Non-Qualified Option
granted under this Plan.

 

7.                                      Terms and Conditions of
Non-Qualified Options

 

Options granted under the
Plan may be Non-Qualified Options.  When
the Committee approves a grant of a Non-Qualified Option to a Participant, it
shall prepare or cause to be prepared an option agreement (“Non-Qualified
Option Agreement”) setting forth the terms of the Non-Qualified Option, and
such Non-Qualified Option Agreement shall be signed on behalf of the Company
and by the Participant.  Non-Qualified
Options granted under this Plan shall
be subject to the foregoing and to the following terms and conditions and to
such other terms and conditions, not inconsistent therewith, as the Committee
shall determine; provided, however, that Non-Qualified Options that are
Director Options shall be governed by the provisions of Section 8 to the
extent that they are inconsistent with the provisions of this Section 7.

 

(a)                                  Number of Shares and Exercise Price.  The Non-Qualified Option Agreement shall
state the total number of shares of Common Stock subject to the Non-Qualified
Option it evidences, the Exercise Price per share of Common Stock, and the
other terms of the Non-Qualified Option. 
The Exercise Price of any Non-Qualified Option shall be equal to or
greater than Fair Market Value.  The
number of shares of Common Stock subject to the Non-Qualified Option and the
Exercise Price shall be adjustable as provided in Section 13(a) of this
Plan.  Non-Qualified Option Agreements
may be electronically delivered by the Company to a Participant under this
provision.

 

(b)                                 Exercisability; Term.  Non-Qualified Options granted under the Plan
shall be exercisable at such time(s) and upon such terms and conditions as may
be determined by the Committee, but in no event shall a Non-Qualified Option be
exercisable more than eight (8) years after the date it is granted, except as
the Committee may determine under Section 13(e) of the Plan.  The period during which a Non-Qualified
Option may be exercised once it is granted may not be reduced, except as provided
in Sections 7(e), (f) and (g) of this Plan.

 

(c)                                  Exercise of Non-Qualified Options.  Except as otherwise provided in the
applicable Non-Qualified Option Agreement, a Non-Qualified Option may be
exercised for all, or from time to time any part, of the shares of Common Stock
for which it is then exercisable.  For
purposes of this Section 7, the exercise date of a Non-Qualified Option shall
be the date a written or electronic notice of exercise and full payment of the
purchase price are received by the Company in accordance with this Section 7(c)
and Section 7(d) below.  The purchase
price for the shares of Common Stock as to which a Non-Qualified Option is
exercised shall be paid to the Company in cash or its equivalent, such as by
check or wire transfer or, if provided in the Non-Qualified Option Agreement or
with the consent of the Committee:  (i)
in shares of Common Stock having a Fair Market Value equal to the aggregate
Exercise Price of the shares of Common Stock being purchased and satisfying
such other requirements as may be imposed by the Committee; provided, that such
shares were then purchased on the open market or

 

10

 

have been held
by the Participant for at least six months (or such other period as established
from time to time by the Committee in order to avoid adverse accounting
treatment under generally accepted accounting principles); (ii) partly in cash
and partly in such shares; or (iii) if there is a public market for the shares
of Common Stock at such time, through the delivery of irrevocable instructions
to a broker to sell shares of Common Stock obtained upon the exercise of the
Non-Qualified Option and to deliver promptly to the Company an amount out of
the proceeds of such sale equal to the aggregate Exercise Price for the shares
being purchased.

 

(d)                                 Manner of Exercise of Non-Qualified
Options.  A Non-Qualified
Option shall be exercised only by the Participant (i) delivering a completed
and signed written or electronic notice of exercise to the Company in the form
prescribed by the Company specifying the number of shares of Common Stock as to
which the Non-Qualified Option is being exercised; (ii) delivering the original
Non-Qualified Option Agreement to the Company; and (iii) paying to the Company
the full amount of the Exercise Price for the number of shares of Common Stock
with respect to which the Non-Qualified Option is being exercised as provided
in Section 7(c) above.  When shares of
Common Stock are issued to the Participant upon the exercise of that
Participant’s Non-Qualified Option, the fact of such issuance shall be noted on
the Non-Qualified Option Agreement by the Company before the Non-Qualified
Option Agreement is returned to the Participant.  When all shares of Common Stock covered by
the Non-Qualified Option Agreement have been issued by the Company to the
Participant or when the Non-Qualified Option expires, the Participant shall
deliver the Non-Qualified Option Agreement to the Company, which shall cancel
it.  After the receipt by the Company of
the written or electronic notice of exercise and payment in full of the
Exercise Price in accordance with Sections 7(c) and 7(d), the Company shall
deliver or cause to be delivered to the Participant exercising the
Non-Qualified Option stock certificates evidencing the number of shares with
respect to which the Non-Qualified Option has been exercised, issued in the
Participant’s name; provided, however, that such delivery shall be deemed
effective for all purposes when the Company or its stock transfer agent (if
any) has deposited such stock certificates in the United States mail, postage
prepaid, addressed to the Participant at the address specified in the written
or electronic notice of exercise. 
Non-Qualified Option Agreements may be electronically delivered by the
Participant to the Company under this provision.

 

(e)                                  Termination of Employment or
Service.  If a Participant
who holds a Non-Qualified Option shall cease to be employed by or performing
services for the Company or any Affiliate for any reason other than death or
Disability, unless the applicable Non-Qualified Option Agreement provides
otherwise, such Non-Qualified Option shall immediately and automatically
terminate and be forfeited, whether or not exercisable, and neither such
Participant nor any of the Participant’s heirs, personal representatives,
successors or assigns shall have any rights with respect to such Non-Qualified
Option; provided, however, that if such termination is due to any reason other
than termination by the Company or any Affiliate for Cause, all outstanding
Non-Qualified Options then held by such Participant will remain exercisable to
the extent they were exercisable as of such

 

11

 

termination
for a period of three (3) months after such termination (but in no event after
the expiration date of any such Non-Qualified Option).  Unless the applicable Qualified Option
Agreement provides otherwise, if an independent contractor or other
non-employment relationship between the Participant and the Company or an
Affiliate is terminated due to the commencement of an employment relationship
with the Company or an Affiliate, or if an employment relationship between the
Participant and the Company or an Affiliate is terminated due to the
commencement of an independent contractor or other non-employment relationship
with the Company or an Affiliate, such change in status shall be a termination
of employment or service under this Section 7(e).

 

(f)                                    Death or Disability of Participant.  Unless otherwise provided in the applicable
Non-Qualified Option Agreement, if a Participant who is a natural person shall
cease to be employed by or performing services for the Company or any Affiliate
as a result of the Participant’s death or Disability, any Non-Qualified Option
held by such Participant will become immediately exercisable in full and will
remain exercisable for a period of one (1) year after the date of
termination, but in no case later than the expiration date of such Non-Qualified
Option.  Upon the death of a Participant,
any Non-Qualified Option held by such Participant may be exercised pursuant to
Sections 7(c) and (d) of this Plan only by the person or persons to whom the
Participant’s rights under the Non-Qualified Option shall pass by will or the
laws of descent and distribution.

 

(g)                                 Modification of Rights Upon
Termination. 
Notwithstanding the other provisions of this Section 7, upon a
Participant’s termination of employment or other service with the Company and
all Affiliates, the Committee may, in its sole discretion (which may be
exercised at any time on or after the date of grant, including following such
termination), cause Non-Qualified Options (or any part thereof) then held by
such Participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however, that no
Non-Qualified Option may remain exercisable beyond its expiration date.

 

(h)                                 Breach of Confidentiality or
Non-compete Agreements. 
Notwithstanding anything in the Plan to the contrary, if a Participant
materially breaches the terms of any confidentiality or non-compete agreement
entered into with the Company or any Affiliate, whether such breach occurs
before or after termination of such Participant’s employment or other service
with the Company or any Affiliate, the Committee, in its sole discretion, may
immediately terminate all rights of the Participant under the Plan and any
agreements evidencing a Non-Qualified Option then held by the Participant
without notice of any kind.

 

(i)                                     Date of Termination of Employment or
Other Service.  A
Participant’s employment or other service will, for purposes of the Plan, be
deemed to have terminated as provided in Section 6(i) of the Plan.

 

(j)                                     No Obligation to Exercise
Non-Qualified Option.  The
grant of a Non-Qualified Option under the Plan shall impose no obligation on
the Participant to exercise such Non-Qualified Option.

 

12

 

8.                                      Automatic
Grants of Director Options to Non-employee Directors

 

(a)                                  Automatic Grants of Director
Options.  Under the Plan,
each Non-employee Director shall automatically be granted Director Options to
purchase shares of Common Stock as follows:

 

(i)                                     Initial
Grants of Director Options.  Each person who is first elected
or appointed to serve as a Non-employee Director after the termination date of
the Vital Images, Inc. 1997 Director Stock Option Plan (the “Director Plan”),
and who did not serve as an employee Director immediately before serving as a
Non-employee Director, shall automatically be granted a Director Option on the
date of his or her initial election or appointment to the Company’s Board of
Directors to purchase 18,000 shares of Common Stock (the “Initial Grant”).

 

(ii)                                  Additional
Grants of Director Options.  On each
successive third anniversary of
the Initial Grant of a Director Option to a Non-employee Director under
Section 8(a)(i) of the Plan, and on each successive third anniversary of
the date of the most recent grant of an option under Section 5(a)(ii)(B)
of the Director Plan to a Non-employee Director who served as such as of the
Effective Date, each such Non-employee Director will automatically be granted
an additional Option to purchase 18,000 shares of Common Stock, but only if
such person is a Non-employee Director on such date.

 

(iii)                               Vesting,
Exercisability and Expiration.  All
Director Options granted under Section 8(a) shall vest and become exercisable
in cumulative installments with respect to one-third of the shares of Common
Stock subject to such Director Options on the first, second and third
December 31 following the date of grant of such Director Option.  All Director Options granted under this
Section 8(a) shall expire five (5) years after the date of grant.

 

(iv)                              Exercise
Price.  The exercise price of
Director Options granted under this Section 8 shall be equal to 100% of
the Fair Market Value of one share of Common Stock on the date of grant of the
Director Option.

 

(v)                                 Effect
of Limited Number of Shares Under Plan. 
Notwithstanding the provisions of this Section 8(a), if an automatic
grant of a Director Option under this Section 8(a) would cause the number
of shares subject to outstanding Options and other Awards granted under this
Plan plus shares of Common Stock previously purchased upon exercise of Options
and other Awards to exceed the number of shares set forth in Section 3, then
each such automatic grant shall be for that number of shares determined by
dividing the total number of shares of Common Stock remaining available for
grant under Section 3 of this Plan by the number of Directors on an automatic
grant date.  Any further grants shall
then be deferred until such time, if any, as additional shares of Common Stock
become available for grant under the Plan through action of the shareholders to
increase the number of shares which may be issued under the Plan or through

 

13

 

cancellation
or expiration of Options and other Awards previously granted under this Plan.

 

(b)                                 Discretionary Grants.  In addition to the Director Options granted
pursuant to Section 8(a), a Director may be granted one or more Options or
other Awards under the Plan, and such Options or other Awards will be 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; provided,
however, that any Director Option shall be subject to the following conditions:

 

(i)                                     Exercise
Price.  The per share price to be
paid by a Director upon exercise of a Director Option granted pursuant to this
Section 8(b) will be determined by the Committee in its discretion at the time
of the grant of the Director Option; provided, however, that such price shall
not be less than 100% of the Fair Market Value of one share of Common Stock on
the date of grant.

 

(ii)                                  Exercisability
and Duration.  A Director Option
granted pursuant to this Section 8(b) will become exercisable at such times and
in such installments as may be determined by the Committee in its sole
discretion at the time of grant; provided, however, that no Director Option
shall be exercisable after five (5) years from its date of grant.

 

(c)                                  Director Option Agreements.  When a Director Option is automatically
granted under Section 8(a), or when the Committee approves a grant of a
Director Option, the Committee shall prepare or cause to be prepared an option
agreement (“Director Option Agreement”) setting forth the terms of the Director
Option, and such Director Option Agreement shall be signed on behalf of the
Company and by the Participant.

 

(d)                                 Exercise of Director Options.  Except as otherwise provided in the
applicable Director Option Agreement, a Director Option may be exercised for
all, or from time to time any part, of the shares of Common Stock for which it
is then exercisable.  For purposes of
this Section 8, the exercise date of a Director Option shall be the date a
written or electronic notice of exercise and full payment of the purchase price
are received by the Company in accordance with this Section 8(d) and Section
8(e) below.  The purchase price for the
shares of Common Stock as to which a Director Option is exercised shall be paid
to the Company in cash or its equivalent, such as by check or wire transfer or,
if provided in the Director Option Agreement or with the consent of the
Committee:  (i) in shares of Common Stock
having a Fair Market Value equal to the aggregate Exercise Price of the shares
of Common Stock being purchased and satisfying such other requirements as may
be imposed by the Committee; provided, that such shares were then purchased on
the open market or have been held by the Participant for at least six months (or
such other period as established from time to time by the Committee in order to
avoid adverse accounting treatment under generally accepted accounting
principles); (ii) partly in cash and partly in such shares; or (iii) if there
is a public market for the shares of Common Stock at such time, through the
delivery of irrevocable instructions to a broker to sell shares of Common Stock
obtained upon the exercise of the Director Option and to deliver promptly to
the Company an

 

14

 

amount out of
the proceeds of such sale equal to the aggregate Exercise Price for the shares
being purchased.

 

(e)                                  Manner of Exercise of Director
Options.  A Director
Option shall be exercised only by the Participant (i) delivering a completed
and signed written or electronic notice of exercise to the Company in the form
prescribed by the Company specifying the number of shares of Common Stock as to
which the Director Option is being exercised; (ii) delivering the original
Director Option Agreement to the Company; and (iii) paying to the Company the
full amount of the Exercise Price for the number of shares of Common Stock with
respect to which the Director Option is being exercised as provided in Section
8(d) above.  When shares of Common Stock
are issued to the Participant upon the exercise of that Participant’s Director
Option, the fact of such issuance shall be noted on the Director Option
Agreement by the Company before the Director Option Agreement is returned to
the Participant.  When all shares of
Common Stock covered by the Director Option Agreement have been issued by the
Company to the Participant or when the Director Option expires, the Participant
shall deliver the Director Option Agreement to the Company, which shall cancel
it.  After the receipt by the Company of
the written or electronic notice of exercise and payment in full of the
Exercise Price in accordance with Sections 8(d) and 8(e), the Company shall
deliver or cause to be delivered to the Participant exercising the Director
Option stock certificates evidencing the number of shares with respect to which
the Director Option has been exercised, issued in the Participant’s name;
provided, however, that such delivery shall be deemed effective for all
purposes when the Company or its stock transfer agent (if any) has deposited
such stock certificates in the United States mail, postage prepaid, addressed
to the Participant at the address specified in the written or electronic notice
of exercise.  Director Option Agreements
may be electronically delivered by the Participant to the Company under this
provision.

 

(f)                                    Termination of Status as a Director.  Subject to the provisions of
Sections 8(g) and 8(h), if a Director ceases to serve as a Director, he or
she may, but only within three (3) months after the date he or she ceases to be
a Director of the Company, exercise his or her Director Option to the extent
that he or she was entitled to exercise it at the date of such
termination.  Any portion of a Director
Option that is not exercisable on the date a Director ceases to be a Director
of the Company, and any portion of a Director Option which the Director was
entitled to exercise that is not exercised within the time specified herein,
shall immediately and automatically terminate and be forfeited, and neither
such Director nor any of the Director’s heirs, personal representatives,
successors or assigns shall have any rights with respect to such Director
Option.

 

(g)                                 Disability of Director.  Notwithstanding the provisions of Section 8(f)
above, if a Director is unable to continue his or her service as a Director
with the Company as a result of his or her Disability, he or she may, but only
within one (1) year after the date of termination of such service, exercise his
or her Director Option to the extent he or she was entitled to exercise it at
the date of such termination.  Any
portion of a Director Option that is not exercisable on the date a Director
ceases to be a Director of the Company, and any portion of a Director Option

 

15

 

which the
Director was entitled to exercise that is not exercised within the time
specified herein, shall immediately and automatically terminate and be
forfeited, and neither such Director nor any of the Director’s heirs, personal
representatives, successors or assigns shall have any rights with respect to
such Director Option.

 

(h)                                 Death of Director.  Upon the death of a Director holding a
Director Option:

 

(i)                                     during
the term of the Director Option when such Director was, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Director Option, the
Director Option may be exercised, at any time within one (1) year following the
date of death, by the person who acquired the right to exercise such Director
Option by bequest or inheritance, but only to the extent of the right to
exercise that existed at the date of death;

 

(ii)                                  within
three (3) months after the termination of Continuous Status as a Director, the
Director Option may be exercised, at any time within three (3) months following
the date of death, by such Director’s estate or by a person who acquired the
right to exercise the Director Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination
of Continuous Status as a Director; and

 

(iii)                               any
portion of a Director Option that is not exercisable on the date of a Director’s
death, and any portion of a Director Option which the Director was entitled to
exercise that is not exercised within the time specified in
Section 8(h)(i) or Section 8(h)(ii), shall immediately and
automatically terminate and be forfeited, and neither such Director nor any of
the Director’s heirs, personal representatives, successors or assigns shall
have any rights with respect to such Director Option.

 

9.                                      Terms and Conditions of
Stock Appreciation Rights

 

(a)                                  Grants.  The Committee may grant a Stock Appreciation
Right independent of an Option or in connection with an Option or a portion
thereof.  Any grant of a Stock
Appreciation Right under the Plan shall be evidenced by an Award agreement in
such form as the Committee shall from time to time approve and which shall set
forth the terms and conditions of the Stock Appreciation Right.  The Committee may impose such terms and
conditions upon any Stock Appreciation Right as it deems fit.  A Stock Appreciation Right granted in
connection with an Option or a portion thereof (i) may be granted at the time
the related Option is granted or at any time before the exercise or
cancellation of the related Option, (ii) shall cover the same number of shares
of Common Stock covered by the Option (or such fewer number of shares of Common
Stock as the Committee may determine), and (iii) shall be subject to the same
terms and conditions as such Option except for such additional limitations as
are contemplated by this Section 9 (or such additional limitations as may be
included in the Award agreement evidencing such Stock Appreciation Right).

 

(b)                                 Terms.  The exercise price per share of Common Stock
of a Stock Appreciation Right shall be an amount determined by the Committee
but in no event shall such

 

16

 

amount be less
than the Fair Market Value of a share of Common Stock on the date the Stock
Appreciation Right is granted.  In
addition, in the case of a Stock Appreciation Right granted in conjunction with
an Option or a portion thereof, the exercise price shall not be less than the
Exercise Price of the related Option. 
Each Stock Appreciation Right granted independent of an Option shall
entitle a Participant upon exercise to an amount equal to (i) the excess of (A)
the Fair Market Value on the exercise date of one share of Common Stock over
(B) the exercise price per share, times (ii) the number of shares of Common
Stock covered by the Stock Appreciation Right. 
Each Stock Appreciation Right granted in conjunction with an Option or a
portion thereof shall entitle a Participant to surrender to the Company the
unexercised Option or any portion thereof and to receive from the Company in
exchange therefor an amount equal to (I) the excess of (x) the Fair Market
Value on the exercise date of one share of Common Stock over (y) the Exercise
Price per share of Common Stock, times (II) the number of shares of Common
Stock covered by the Option, or portion thereof, which is surrendered.  Payment shall be made in shares of Common
Stock or in cash, or partly in shares and partly in cash (any such shares of
Common Stock valued at such Fair Market Value), all as set forth in the Award
agreement evidencing such Stock Appreciation Right or as otherwise determined
in the discretion of the Committee. 
Stock Appreciation Rights may be exercised from time to time upon actual
receipt by the Company of a written or electronic notice of exercise stating
the number of shares of Common Stock with respect to which the Stock
Appreciation Right is being exercised. 
The date a notice of exercise is received by the Company shall be the
exercise date.  No Stock Appreciation
Right shall be exercisable after five (5) years from its date of grant.

 

(c)                                  Termination of Employment or
Service.  If a Participant
who holds a Stock Appreciation Right shall cease to be employed by or
performing services for the Company or any Affiliate for any reason other than
death or Disability, unless the applicable Award agreement provides otherwise,
such Stock Appreciation Right shall immediately and automatically terminate and
be forfeited, whether or not exercisable, and neither such Participant nor any
of the Participant’s heirs, personal representatives, successors or assigns
shall have any rights with respect to such Stock Appreciation Right; provided,
however, that if such termination is due to any reason other than termination
by the Company or any Affiliate for Cause, all Stock Appreciation Rights then
held by such Participant will remain exercisable to the extent they were
exercisable as of such termination for a period of three (3) months after such
termination (but in no event after the expiration date of any such Stock
Appreciation Right).  Unless the
applicable Award agreement provides otherwise, if an independent contractor or
other non-employment relationship between the Participant and the Company or an
Affiliate is terminated due to the commencement of an employment relationship
with the Company or an Affiliate, or if an employment relationship between the
Participant and the Company or an Affiliate is terminated due to the
commencement of an independent contractor or other non-employment relationship
with the Company or an Affiliate, such change in status shall be a termination
of employment or service under this Section 9(c).

 

17

 

(d)                                 Death or Disability of Participant.  Unless otherwise provided in the applicable
Award agreement, if a Participant who is a natural person shall cease to be
employed by or performing services for the Company or any Affiliate as a result
of the Participant’s death or Disability, any Stock Appreciation Right held by
such Participant will become immediately exercisable in full and will remain
exercisable for a period of one (1) year after the date of termination,
but in no case later than the expiration date of such Stock Appreciation
Right.  Upon the death of a Participant,
any Stock Appreciation Right may be exercised pursuant to Section 9(b) of this
Plan only by the person or persons to whom the Participant’s rights under the
Stock Appreciation Right shall pass by will or the laws of descent and
distribution.

 

(e)                                  Modification of Rights Upon
Termination. 
Notwithstanding the other provisions of this Section 9, upon a
Participant’s termination of employment or other service with the Company and
all Affiliates, the Committee may, in its sole discretion (which may be
exercised at any time on or after the date of grant, including following such
termination), cause Stock Appreciation Rights (or any part thereof) then held
by such Participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however, that no Stock
Appreciation Right may remain exercisable beyond its expiration date.

 

(f)                                    Breach of Confidentiality or
Non-compete Agreements. 
Notwithstanding anything in the Plan to the contrary, if a Participant
materially breaches the terms of any confidentiality or non-compete agreement
entered into with the Company or any Affiliate, whether such breach occurs
before or after termination of such Participant’s employment or other service
with the Company or any Affiliate, the Committee, in its sole discretion, may
immediately terminate all rights of the Participant under the Plan and any
agreements evidencing a Stock Appreciation Right then held by the Participant
without notice of any kind.

 

(g)                                 Date of Termination of Employment or
Other Service.  A
Participant’s employment or other service will, for purposes of the Plan, be
deemed to have terminated as provided in Section 6(i) of the Plan.

 

(h)                                 No Obligation to Exercise Stock
Appreciation Right.  The
grant of a Stock Appreciation Right under the Plan shall impose no obligation
on the Participant to exercise such Stock Appreciation Right.

 

10.                               Awards of Restricted Stock

 

(a)                                  Grant.  Awards of Restricted Stock subject to
forfeiture and transfer restrictions may be granted by the Committee under the
Plan.  Any Awards of Restricted Stock
shall be evidenced by an Award agreement in such form as the Committee shall
from time to time approve and which shall set forth the terms and conditions of
the Award of Restricted Stock.  Subject
to the provisions of the Plan, the Committee shall determine the number of shares
of Restricted Stock to be granted to each Participant; the duration of any
period during which, and the conditions, if any, under which, the Restricted
Stock may be forfeited to the Company; and the other terms and conditions of
such Awards.  The Committee may determine
a

 

18

 

period of time
during which the Participant receiving the Award of Restricted Stock must
remain in the continuous employment of the Company in order for the forfeiture
and transfer restrictions to lapse.  If
the Committee so determines, the restrictions may lapse during any such
restricted period in installments with respect to specified portions of the
shares of Restricted Stock covered by the Award of Restricted Stock.  The Committee may also impose performance or
other conditions that will subject the shares subject to the Award of
Restricted Stock to forfeiture and transfer restrictions.  The Committee may, at any time, in its
discretion, waive all or any part of any restrictions applicable to any or all
outstanding Awards of Restricted Stock.

 

(b)                                 Transfer
Restrictions.  Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as provided in
the Plan or the applicable Award agreement. 
At the time of the grant of an Award of Restricted Stock, a stock
certificate representing the number of shares of Restricted Stock awarded
thereunder shall be registered in the name of the Participant and held by the
Company.  Such stock certificate may bear
a legend describing the conditions of the Restricted Stock Award.  Unless the Award agreement evidencing an
Award of Restricted Stock or the Committee provides otherwise, the Participant
receiving the Award of Restricted Stock shall have all rights of a shareholder
with respect to the shares of Restricted Stock subject to such Award, including
the right to receive any dividends and the right to vote such shares, subject
to the following restrictions:  (i) the
Participant receiving the Award of Restricted Stock shall not be entitled to
delivery of the stock certificate until the expiration of the restricted period
and the fulfillment of any other restrictive conditions set forth in the
applicable Award agreement; (ii) none of the shares of Common Stock subject to
the Award of Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of during such restricted
period or until after the fulfillment of any such other restrictive condition;
and (iii) all of the shares of Restricted Stock shall be forfeited and all
rights of the Participant to such shares shall terminate, without any further
obligation on the part of the Company, unless the Participant remains in the
continuous employment of the Company for the entire restricted period.  Any shares of Common Stock, any other
securities of the Company and any other property (except for cash dividends)
distributed with respect to the shares subject to an Award of Restricted Stock
shall be subject to the same restrictions, terms and conditions as such
shares.  After the lapse or termination
of the restrictions of an Award of Restricted Stock, or at such earlier time as
otherwise determined by the Committee, a stock certificate evidencing the
shares of Common Stock subject to the Award of Restricted Stock that bears no
legend describing the conditions of an Award of Restricted Stock shall be
delivered to the Participant or his or her beneficiary or estate, as the case
may be.

 

(c)                                  Dividends. 
Dividends or dividend equivalents paid on any shares of Restricted Stock
may be paid directly to the Participant, withheld by the Company subject to
vesting of the Restricted Stock pursuant to the terms of the applicable Award
agreement, or may be reinvested in additional Awards of Restricted Stock, as
determined by the Committee in its discretion.

 

19

 

(d)                                 Termination of Employment or
Service.  If a Participant
who holds a Restricted Stock Award shall cease to be employed by or performing
services for the Company or any Affiliate for any reason other than death or
Disability prior to the vesting of shares of Restricted Stock granted to such
Participant, unless the applicable Award agreement provides otherwise, such
Restricted Stock Award shall immediately and automatically terminate and be
forfeited and neither such Participant nor any of the Participant’s heirs,
personal representatives, successors or assigns shall have any rights with
respect to such unvested Restricted Stock Award.  Unless the applicable Award agreement
provides otherwise, if an independent contractor or other non-employment
relationship between the Participant and the Company or an Affiliate is
terminated due to the commencement of an employment relationship with the
Company or an Affiliate, or if an employment relationship between the
Participant and the Company or an Affiliate is terminated due to the
commencement of an independent contractor or other non-employment relationship
with the Company or an Affiliate, such change in status shall be a termination
of employment or service under this Section 10(d).

 

(e)                                  Death or Disability of Participant.  Unless otherwise provided in the applicable
Award agreement, if a Participant who is a natural person shall cease to be
employed by or performing services for the Company or any Affiliate as a result
of the Participant’s death or Disability prior to the vesting of shares subject
to the Restricted Stock Award granted to such Participant, all of such shares
shall become fully vested.  Upon the
death of a Participant, the person entitled to any such shares of Restricted
Stock shall be the person or persons to whom the Participant’s rights under the
Restricted Stock Award shall pass by will or the laws of descent and distribution.

 

(f)                                    Modification of Rights Upon
Termination. 
Notwithstanding the other provisions of this Section 10, upon a
Participant’s termination of employment or other service with the Company and
all Affiliates, the Committee may, in its sole discretion (which may be
exercised at any time on or after the date of grant, including following such
termination), cause Restricted Stock Awards (or any part thereof) then held by
such Participant to become or continue to become vested and following such
termination of employment or service, in each case in the manner determined by
the Committee.

 

(g)                                 Breach of Confidentiality or
Non-compete Agreements. 
Notwithstanding anything in the Plan to the contrary, if a Participant
materially breaches the terms of any confidentiality or non-compete agreement
entered into with the Company or any Affiliate, whether such breach occurs
before or after termination of such Participant’s employment or other service
with the Company or any Affiliate, the Committee, in its sole discretion, may
immediately terminate all rights of the Participant under the Plan and any
agreements evidencing a Restricted Stock Award then held by the Participant
without notice of any kind.

 

(h)                                 Date of Termination of Employment or
Other Service.  A Participant’s
employment or other service will, for purposes of the Plan, be deemed to have
terminated as provided in Section 6(i) of the Plan.

 

20

 

(i)                                     Other
Provisions.  Each Award agreement relating to an Award of
Restricted Stock authorized under this Section 10 may contain such other
provisions as the Committee shall deem advisable including, but not limited to,
a requirement that shares of Common Stock acquired under an Award of Restricted
Stock be subject to a restriction on the Participant’s ability to transfer the
shares to third parties without the consent of the Company.

 

11.                               Other Awards

 

(a)                                  Other Stock-Based Awards.  The Committee, in its sole discretion, may
grant Awards of shares of Common Stock and Awards that are valued in whole or
in part by reference to, or are otherwise based on, shares of Common Stock or
on the Fair Market Value thereof (“Other Stock-Based Awards”).  Such Other Stock-Based Awards shall be in
such form, and dependent on such conditions, as the Committee shall determine
including, without limitation, the right to receive, or vest with respect to,
one or more shares of Common Stock (or the equivalent cash value of such
shares) upon the completion of a specified period of service, the occurrence of
an event and/or the attainment of performance objectives.  Other Stock-Based Awards may be granted alone
or in addition to any other Awards granted under the Plan.  Subject to the provisions of the Plan, the
Committee shall determine the number of shares of Common Stock to be awarded to
a Participant under (or otherwise related to) such Other Stock-Based Awards;
whether such Other Stock-Based Awards shall be settled in cash, shares of
Common Stock or a combination of cash and such shares; and all other terms and
conditions of such Awards (including, without limitation, the vesting
provisions thereof and provisions ensuring that all shares so awarded and
issued shall be fully paid and non-assessable). 
Any Other Stock-Based Awards shall be evidenced by an Award agreement in
such form as the Committee shall from time to time approve and which shall set
forth the terms and conditions of the Other Stock-Based Award.  Unless the applicable Award agreement provides
otherwise, if a Participant who holds an Other Stock-Based Award shall cease to
be employed by or performing services for the Company or an Affiliate for any
reason, such Other Stock-Based Award shall be treated by the Committee as
though it is either a Non-Qualified Option or a Restricted Stock Award, as the
Committee shall determine in its discretion.

 

(b)                                 Other Cash-Based Awards.  In addition to the Awards described above,
and subject to the terms of the Plan, the Committee may grant such other
incentives denominated in cash and payable in cash under the Plan as the
Committee determines to be in the best interests of the Company and subject to
such other terms and conditions as it deems appropriate (“Other Cash-Based
Awards”).  Any Other Cash-Based Awards
shall be evidenced by an Award agreement in such form as the Committee shall
from time to time approve and which shall set forth the terms and conditions of
the Other Cash-Based Award.  Unless the
applicable Award agreement provides otherwise, if a Participant who holds an
Other Cash-Based Award shall cease to be employed by or performing services for
the Company or an Affiliate for any reason, such Other Cash-Based Award shall
be treated as though it is a Stock Appreciate Right or otherwise as the
Committee shall determine in its discretion.

 

21

 

12.                               Performance-Based
Awards.

 

(a)                                  Performance-Based Awards.  Notwithstanding anything to the contrary
herein, the Committee may grant performance-based Options, Awards of Restricted
Stock, Other Stock-Based Awards and Other Cash-Based Awards to Participants (“Performance-Based
Awards”).  Any such Awards granted to
Participants who may be “covered employees” under Section 162(m) of the Code or
any successor section thereto shall be consistent with the provisions
thereof.  In such cases, a Participant’s
Performance-Based Award shall be determined based on the attainment of written
performance goals approved by the Committee for a performance period
established by the Committee (i) when the outcome for that performance period
is substantially uncertain and (ii) by the earlier of (A) three (3) months
after the commencement of the performance period to which the performance goal
relates or (B) the number of days which is equal to twenty-five percent (25%) of
the relevant performance period.

 

(b)                                 Performance Goals.  The performance goals referred to in Section
12(a) must be objective and shall be based upon one or more of the following
criteria:  (i) consolidated earnings
before or after taxes (including earnings before interest, taxes, depreciation
and amortization); (ii) net income; (iii) operating income;
(iv) earnings per share; (v) book value per share of Common Stock;
(vi) return on shareholders’ equity; (vii) expense management;
(viii) return on investment; (ix) improvements in capital structure;
(x) profitability of an identifiable business unit or product;
(xi) maintenance or improvements of profit margins; (xii) stock
price; (xiii) market share; (xiv) revenues or sales; (xv) costs;
(xvi) cash flow; (xvii) working capital; (xviii) return on
assets; (xix) asset turnover; (xx) inventory turnover;
(xxi) economic value added (economic profit); and (xxii) total
shareholder return.  The foregoing
criteria may relate to the Company, one or more of its Parents or Subsidiaries
or one or more of its divisions or units, or any combination of the foregoing,
and may be applied on an absolute basis and/or be relative to one or more peer
group companies or indices, or any combination thereof, all as the Committee
shall determine.  In addition, to the
degree consistent with Section 162(m) of the Code (or any successor
section thereto), the performance goals may be calculated without regard to the
negative effect of unusual or nonrecurring items, extraordinary items, discontinued
operations or cumulative effects of accounting changes.  The Committee shall determine whether, with
respect to a performance period, the applicable performance goals have been met
with respect to a given Participant who may be a covered employee and, if they
have, shall so certify and ascertain the amount of the applicable
Performance-Based Award.  No
Performance-Based Awards will be paid for such performance period until such
certification is made by the Committee. 
The amount of the Performance-Based Award actually paid to a given
Participant may be less than the amount determined by the applicable
performance goal formula, at the discretion of the Committee.  The amount of the Performance-Based Award
determined by the Committee for a performance period shall be paid to the
Participant at such time as determined by the Committee in its sole discretion
after the end of such performance period.

 

22

 

13.                               Adjustments Upon Certain
Events

 

Notwithstanding
any other provisions in the Plan to the contrary, the following provisions
shall apply to all Awards granted under the Plan:

 

(a)                                  Generally.  Upon any change in the outstanding shares of
Common Stock after the Effective Date by reason of any stock dividend, stock
split, reverse stock split, reclassification, combination, exchange of shares
or other similar recapitalization of the Company, there shall be an appropriate
adjustment to (i) the number or kind of shares of Common Stock or other
securities issued or reserved for issuance pursuant to the Plan or pursuant to
outstanding Awards, (ii) the Exercise Price of any Option or the exercise
price of any Stock Appreciation Right, and/or (iii) any other affected
terms of such Awards.  Notwithstanding
the foregoing, no fractional shares shall be issued or paid for.  No adjustment shall be made under this
Section 13(a) upon the issuance by the Company of any warrants, rights or
options to acquire additional Common Stock or of securities convertible into
Common Stock unless such warrants, rights, options or convertible securities
are issued to all shareholders of the Company on a proportionate basis.

 

(b)                                 Change in Control.  Unless otherwise provided by the Committee
either in the applicable Award agreement at the time of grant or at any time
after the grant of an Award under the Plan (including pursuant to
Section 13(e) before the occurrence of a sale, merger, consolidation,
reorganization, liquidation, dissolution or other “Change in Control” (as
defined below)), in the event of a Change in Control, the following shall occur
immediately as of the effective date of such Change in Control with respect to
any and all Awards outstanding as of the effective date of such Change in
Control:  (i) any and all Awards
granted hereunder will be, as nearly as may reasonably be, automatically
converted into the same type of Award to acquire the kind and amount of shares
of stock or other securities or property (including cash) which the Participant
would have owned or have been entitled to receive as of the effective date of
the Change in Control had the Awards been exercised or realized in full
immediately before the effective date of the Change in Control; (ii) all
Options will become immediately exercisable in full and will remain exercisable
for the remainder of their terms, regardless of whether the Participants to
whom such Options have been granted remain in the employ or service of the
Company or any Affiliate; (iii) all outstanding Awards of Restricted Stock will
become immediately fully vested regardless of whether the Participants to whom
such Awards have been granted remain in the employ or service of the Company or
any Affiliate; (iv) all other outstanding Awards will vest and/or continue to
vest in the manner determined by the Committee and set forth in the applicable
Award agreement evidencing such Awards; and (v) appropriate adjustment shall be
made in the application of the provisions of all outstanding Awards with
respect to the rights and interests thereafter of each Participant, to the end
that the provisions set forth in each Award shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property (including cash) thereafter deliverable
under the Award.

 

23

 

(c)                                  Definition of Change of Control.  For purposes of this Section 13, “Change in
Control” means:

 

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

 

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

 

(iii)                               a
merger or consolidation to which the Company is a party if the shareholders of
the Company immediately prior to the effective date of such merger or
consolidation have, solely on account of ownership of securities of the Company
at such time, “beneficial ownership” (as defined in Rule 13d-3 under the
Exchange Act) immediately following the effective date of such merger or
consolidation of securities of the surviving company representing (A) more
than 50%, but not more than 80%, of the combined voting power of the surviving
corporation’s then outstanding securities ordinarily having the right to vote
at elections of directors, unless such merger or consolidation has been
approved in advance by the Incumbent Directors (as defined in Section 7(d)
below), or (B) fifty percent (50%) or less of the combined voting power of
the surviving corporation’s then outstanding securities ordinarily having the
right to vote at elections of directors (regardless of any approval by the
Incumbent Directors);

 

(iv)                              any
person becomes after the Effective Date of the Plan the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (A)
twenty percent (20%) or more, but not fifty percent (50%) or more, of the
combined voting power of the Company’s outstanding securities ordinarily having
the right to vote at elections of directors, unless the transaction resulting
in such ownership has been approved in advance by the Incumbent Directors, or
(B) fifty percent (50%) or more of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the Incumbent Directors);

 

(v)                                 the
Incumbent Directors cease for any reason to constitute at least a majority of
the Board; or

 

(vi)                              any
other change in control of the Company of a nature that would be required to be
reported pursuant to Section 13 or 15(d) of the Exchange Act, whether or not
the Company is then subject to such reporting requirements.

 

The provisions
of this Section shall similarly apply to successive transactions of the types
described in Sections 13(c)(i) through (vi).

 

24

 

(d)                                 Incumbent Directors.  For purposes of this Section 13, “Incumbent
Directors” of the Company means the individuals who are members of the Board on
the Effective Date of the Plan and any individual who subsequently becomes a
member of the Board whose election or nomination for election by the Company’s
shareholders was approved by a vote of at least a majority of the Incumbent
Directors (either by specific vote or by approval of the Company’s proxy
statement in which such individual is named as a nominee for director without
objection to such nomination).

 

(e)                                  Additional Adjustments of Awards.  The Committee shall have the discretion,
exercisable without the consent of any Participant affected thereby if not
prohibited by the applicable Award Agreement, at any time before a sale,
merger, consolidation, reorganization, liquidation, dissolution or other Change
in Control transaction, to take such further action as it determines to be
necessary or advisable with respect to Awards. 
Such authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise; paying cash or other consideration in exchange for all or part of
such Awards; and lifting restrictions and other modifications.  The Committee may take such actions with
respect to all Participants, to certain categories of Participants or to only
individual Participants.  The Committee
may take such action before or after granting Awards to which the action
relates and before or after any public announcement with respect to such sale,
merger, consolidation, reorganization, liquidation, dissolution or Change in
Control that is the reason for such action. 
The grant of an Award under the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets.

 

(f)                                    Limitation on Change in Control
Payments.  Notwithstanding
anything in this Plan to the contrary, if, with respect to a Participant, the
acceleration of the vesting of an Award as provided in Section 13(e), the
payment of cash in exchange for all or part of an Award as provided in Section
13(e) or any other adjustment to an Award pursuant to Section 13(e) (which
acceleration, payment or adjustment could be deemed a “payment” within the
meaning of Section 280G(b)(2) of the Code), together with any other “payments”
which such Participant has the right to receive from the Company or any
corporation that is a member of an “affiliated group” (as defined in
Section 1504(a) of the Code without regard to Section 1504(b) of the
Code) of which the Company is a member, would constitute a “parachute payment”
(as defined in Section 280G(b)(2) of the Code), then the “payments” to
such Participant pursuant to Section 13(e) of the Plan will be reduced to the
largest amount as will result in no portion of such “payments” being subject to
the excise tax imposed by Section 4999 of the Code; provided, however, that if
a Participant is subject to a separate agreement with the Company or an
Affiliate that expressly addresses the potential application of
Section 280G or Section 4999 of the Code (including, without
limitation, that “payments” under such agreement or otherwise will not be
reduced or that the Participant will have the discretion to determine which

 

25

 

“payments”
will be reduced), then the limitations of this Section 13(f) will not apply,
and any “payments” to a Participant pursuant to Section 13(e) of the Plan will
be treated as “payments” arising under such separate agreement.

 

14.                               Shares
Acquired for Investment

 

Shares of Common Stock acquired by a
Participant under this Plan shall be acquired by the Participant for investment
and without intention of resale unless, in the opinion of counsel to the
Company, such shares may be purchased without any investment
representation.  Where an investment
representation is deemed necessary, the Committee may require a written
representation to that effect by the Participant as a condition of a Participant
exercising an Option or otherwise obtaining shares of Common Stock pursuant an
Award granted under this Plan, and the Committee may place an appropriate
legend on the stock certificates evidencing the shares of Common Stock so
issued indicating that such shares have not been registered under federal or
state securities laws and describing the restrictions on transfer.  Each Award shall be subject to the
requirement that if, at any time, the Committee shall determine in its
discretion that the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, if necessary or desirable as a condition of, or in connection with, the
granting of such Award or the issuance or purchase of shares of Common Stock
thereunder, then such Award shall not be granted or exercised in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.

 

15.                               No Right to Employment,
Service as a Director or Awards

 

The
granting of an Award under the Plan shall impose no obligation on the Company
or any Affiliate to continue the employment of a Participant and shall not
lessen or affect the Company’s or the Affiliate’s right to terminate the
employment of such Participant.  Nothing
in the Plan will interfere with or limit in any way the right of the Company,
the Board or the Company’s shareholders to terminate the directorship of any
Director at any time, nor confer upon any Director any right to continue to
serve as a director of the Company.  No Participant or other person shall have any
claim to be granted any Award, and there is no obligation for uniform treatment
of Participants or holders or beneficiaries of Awards.  The terms and conditions of Awards and the
Committee’s determinations and interpretations with respect thereto need not be
the same with respect to each Participant.

 

16.                               Other Benefit and
Compensation Programs

 

Payments
and other benefits received by a Participant under an Award shall not be deemed
a 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 an
Affiliate, unless expressly so provided by such other plan, contract or
arrangement or the Committee determines that an Award or portion of an Award
should be included to reflect competitive compensation practices or to
recognize that an Award has been made in lieu of a portion of competitive cash
compensation.

 

26

 

17.                               Successors and Assigns

 

The
Plan shall be binding on all successors and assigns of the Company and a
Participant including, without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant’s creditors.

 

18.                               Nontransferability of
Awards; Designation of Beneficiary

 

(a)                                  Nontransferability.  No
Award or interest in an Award may be sold, assigned, pledged (as collateral for
a loan or as security for the performance of an obligation or for any other
purpose) or transferred by the Participant or made subject to attachment or
similar proceedings otherwise than by will or by the applicable laws of descent
and distribution, except to the extent a Participant designates one or more
beneficiaries on a Company-approved form, as set forth in Section 18(b) of
this Plan, who may exercise the Award or receive payment under the Award after
the Participant’s death.  During a Participant’s
lifetime, an Award may be exercised only by the Participant.

 

(b)                                 Designation
of Beneficiary.  A Participant may designate a beneficiary to
succeed to the Participant’s Awards under the Plan in the event of the
Participant’s death by filing a beneficiary form with the Company and, upon the
death of the Participant, such beneficiary shall succeed to the rights of the
Participant to the extent permitted by law and the terms of this Plan and the
applicable Award agreement.  In the
absence of a validly designated beneficiary who is living at the time of the
Participant’s death, the Participant’s executor or administrator of the
Participant’s estate shall succeed to the Awards, which shall be transferable
by will or pursuant to laws of descent and distribution.

 

19.                               Amendments or Termination

 

The Board may amend, alter
or discontinue the Plan, but no amendment, alteration or discontinuation shall
be made without the consent of a Participant if such action would diminish any
of the rights of the Participant under any Award theretofore granted to such
Participant under the Plan; provided,
however, that the Committee may amend the Plan in such manner as it
deems necessary to permit the granting of Awards meeting the requirements of
the Code or other applicable laws.

 

20.                               International Participants

 

With respect to Participants
who reside or work outside the United States of America, the Committee may, in
its sole discretion, amend the terms of the Plan or adopt such modifications,
procedures or subplans with respect to such Participants as are necessary or
desirable to ensure the viability of the benefits of the Plan, comply with
applicable foreign laws or obtain more favorable tax or other treatment for a
Participant, the Company or an Affiliate; provided, however, that no such
changes shall apply to the Awards to Participants who may be “covered employees”
under Section 162(m) of the Code or any successor thereto unless consistent
with the provisions thereof.

 

27

 

21.                               General

 

(a)                                  Issuance of Shares of Common Stock. 
Notwithstanding any other provision of the Plan, the Company shall have
no obligation to issue or deliver any shares of Common Stock under an Award
granted under the Plan or make any other distribution of benefits under the
Plan unless, in the opinion of the Company’s counsel, such issuance, delivery
or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933, as amended, or any
successor thereto (the “Securities Act”) or the laws of any state or foreign
jurisdiction) and the applicable requirements of any securities exchange or
similar entity.  The Company shall be
under no obligation to any Participant to register for offering or resale or to
qualify for an exemption from registration under the Securities Act, or to
register or qualify under the laws of any state or foreign jurisdiction, any
Awards, shares of Common Stock, security or interest in a security paid or
issued under, or created by, the Plan, or to continue in effect any such
registrations or qualifications if made. 
The Company may issue stock certificates evidencing shares of Common
Stock with such legends and subject to such restrictions on transfer and stop
transfer instructions as counsel for the Company deems necessary or desirable
for compliance by the Company with federal, state and foreign securities
laws.  The Company may also require such
other action or agreement by the Participants as may from time to time be
necessary to comply with applicable securities laws.

 

(b)                                 Stock Certificates.  To the extent this Plan or any applicable
Award agreement provides for the issuance of stock certificates to reflect the
issuance of shares of Common Stock, the issuance may be effected on a
noncertificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange or market on which such shares are
quoted.

 

(c)                                  No Rights as a Shareholder.  Unless otherwise provided by the Committee or
in the Plan or an Award agreement evidencing an Award or in any other written
agreement between a Participant and the Company or an Affiliate, no Award shall
entitle the Participant to any cash dividend, voting or other right of a
shareholder unless and until the date of issuance under the Plan of any shares
of Common Stock that are subject to such Award.

 

(d)                                 No Trust or Fund.  The Plan is intended to constitute an “unfunded”
plan.  Nothing contained herein shall
require the Company to segregate any monies, other property, or shares of
Common Stock, or to create any trusts, or to make any special deposits for any
immediate or deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general unsecured
creditor of the Company.

 

(e)                                  Severability.  If any provision of the Plan or any Award
agreement shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan or Award agreement,
and such Plan or Award agreement shall be construed and enforced as if the
illegal or invalid provision had not been included.

 

28

 

(f)                                    Choice of Law.  The validity, construction, interpretation,
administration and effect of the Plan, and rights relating to the Plan and to
Awards granted under the Plan, shall be governed by the substantive laws, but
not the choice of law rules, of the State of Minnesota.

 

22.                               Effective Date

 

The
Plan shall be effective on March 9, 2006 (the “Effective Date”), which is the
date it was approved by the Board.  The
Plan was approved by the Company’s shareholders on May 4, 2006.

 

29

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