Document:

exv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the “Agreement”) is effective January 1,
2006, by and among Meadowbrook, Inc., and Meadowbrook Insurance Group, Inc., (hereinafter referred
to as the “Company”), and Merton J. Segal (hereinafter referred to as the “Executive”).

RECITALS:

     WHEREAS, the Company and the Executive desire to set forth their respective rights and
obligations in connection with the employment of the Executive by the Company by entering into a
contract of employment;

     NOW THEREFORE, in consideration of the premises and of the mutual covenants, agreements and
understandings contained herein, the parties hereto agree as follows:

AGREEMENT:

     1. Employment. The Company agrees to employ the Executive during the Employment Term (as such
term is hereinafter defined in Paragraph ) and the Executive hereby accepts such employment by the
Company, subject to the terms and conditions hereinafter set forth and the Company’s Associate
Manual (hereinafter referred to as the “Manual”). To the extent that the terms and Conditions of
this Agreement conflict with the Manual, this Agreement shall control while in effect. This
Agreement establishes the terms of Executive’s employment and the payments to which the Executive
is entitled during such employment and upon termination of employment. Nothing in this Agreement
changes the at-will status of the Executive’s employment. The Company retains the right to
terminate Executive’s employment with the Company for any reason and at any time and the Executive
retains the same right.

     2. Responsibilities and Duties. The Executive shall be employed as the Company’s Chairman or
in such other position(s) and with such responsibilities and duties as the Board of Directors of
the Company may from time to time determine. The Executive shall devote his full working time to
the performance of his responsibilities and duties hereunder.

     3. Compensation. In consideration of the performance by Executive of his obligations during
the Employment Term, the Company will during the Employment Term pay the Executive:

	 	(A)	 	Base Salary. A base salary of not less than $31,250 per month
(hereinafter referred to as “Base Salary”). Such Base Salary shall be payable
in accordance with the normal payroll practices of the Company then in effect.
Any increases in the Base Salary shall be determined by the Company.

 

 

	 	(B)	 	Discretionary Bonus. A discretionary bonus targeted at a
minimum of fifty percent (50%) of Executive’s Base Salary (hereinafter referred
to as the “Discretionary Bonus”). This Discretionary Bonus may be paid at the
sole discretion of the Company and will be based on attainment of:

	 	(1)	 	Corporate Goals (growth & profit);
	 
	 	(2)	 	Profit Center Goals; and
	 
	 	(3)	 	Personal Goals and Objectives.

The Company and the Executive shall annually review and establish the Discretionary Bonus
target and the bonus formula described in Section 3(B)(1)-(3).

	 	(C)	 	Stock Options. The Executive has been, and shall continue to
be, eligible for the stock options, in accordance with the terms and conditions
of the 1995 and 2002 Stock Option Plans of Meadowbrook Insurance Group, Inc.
In the event of any Change in Control, all stock options previously granted to
the Executive shall become exercisable by the Executive.
	 
	 	(D)	 	Long Term Incentive Plan. The Executive shall be eligible for
restricted stock awards and performance bonus awards under the Meadowbrook
Insurance Group, Inc. Long Term Incentive Plan.
	 
	 	(E)	 	Severance.

	 	(1)	 	Without Cause Termination or
Termination for Good Reason. In the event that prior to a Change
in Control, Executive’s employment is terminated by the Company
during the Employment Term without Cause or terminated by the
Executive for Good Reason, then the Company shall make the
following payments to the Executive:

	 	(i)	 	Executive shall
be paid a severance equal to the lesser of twenty-four
(24) months of his Base Salary, or the Base Salary for
the months remaining in the Employment Term. This
severance shall be paid bi-monthly in accordance with
the Company’s regular payment schedule of its employees.
	 
	 	(ii)	 	The Executive
shall also be entitled to payment of a pro rata share
of such portion of the Discretionary Bonus for the year
in which his employment terminates that is based on
Company performance criteria. Such pro rata portion
shall be determined by a fraction, the numerator of
which is the number of days in the year that the
Executive is employed by the Company and the denominator
of which is 365.

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	 	 	 	Such payment shall be made no later than the February
28 of the calendar year immediately following the year
in which Executive’s employment terminates.

	 	(iii)	 	The Company
shall also pay the Executive an amount equal to the
premiums payable by the Executive in the event the
Executive elects continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”). Such payments shall cease upon the earlier
of eighteen (18) months of continuation coverage or the
cessation of the Executive’s and the Executive’s family
members rights to COBRA continuation coverage. The
Company shall make such payments directly to the party
to whom premiums are payable at such times as they are
due under COBRA.

	 	(2)	 	Termination Following Change in
Control. In the event that following a Change in Control,
Executive’s employment is terminated by the Company during the
Employment Term without Cause or terminated by the Executive for
Good Reason, then the Company shall make the following payments
to the Executive:

	 	(i)	 	The Company shall
make a single lump sum payment to Executive equal to two
(2) times the sum of the Executive’s existing Base
Salary and the Executive’s target Discretionary Bonus,
subject to repayment by the Executive upon the
Executive’s breach of his covenant to not compete with
the Company or to solicit Company employees as provided
in Section 7. The Company shall make such payment within
ten (10) days following the date the Executive’s
employment terminates.
	 
	 	(ii)	 	The Executive
shall also be entitled to payment of a pro rata share
of such portion of the Discretionary Bonus for the year
in which his employment terminates that is based on
Company performance criteria. Such pro rata portion
shall be determined by a fraction, the numerator of
which is the number of days in the year that the
Executive is employed by the Company and the denominator
of which is 365. Such payment shall be made no later
than the

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	 	 	 	February 28 of the calendar year immediately following
the year in which Executive’s employment terminates.

	 	(iii)	 	The Company
shall also pay the Executive an amount equal to the
premiums payable by the Executive in the event the
Executive elects continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”). Such payments shall cease upon the earlier
of eighteen (18) months of continuation coverage or the
cessation of the Executive’s and the Executive’s family
members rights to COBRA continuation coverage. The
Company shall make such payments directly to the party
to whom premiums are payable at such times as they are
due under COBRA.

	 	(3)	 	For Cause Termination.

	 	(i)	 	For purposes of
this Agreement, “Cause” shall mean:

	 	(a)	 	the failure by the Executive to obey the
reasonable and lawful orders of the Board of
Directors of the Company or his direct
supervisor;
	 
	 	(b)	 	misconduct by the Executive that is materially
injurious to the Company; or
	 
	 	(c)	 	the Executive engaging in dishonest activities
injurious to the Company.

	 	(ii)	 	Should the
Executive’s employment be terminated by the Company for
Cause during the Employment Term, this Agreement shall
be terminated forthwith without notice or payment in
lieu thereof and the Executive shall not be entitled to
receive any other consideration (beyond consideration
accrued to the date of dismissal that is owing but not
yet paid) from the Company.
	 
	 	(iii)	 	Further, in the
event the Executive’s employment is terminated by the
Company during the Employment Term for Cause Executive
shall be paid no severance payments.

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	 	(F)	 	Change in Control. For purposes of this Agreement, a “Change in
Control” shall be deemed to have taken place upon:

	 	(1)	 	The acquisition by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 35% or more of either (a) the then
outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (b) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however,
that for purposes of this subparagraph 1, the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition
by any corporation pursuant to a transaction which complies with
clauses (a), (b) and (c) of subparagraph 3 of this Section
(F); or
	 
	 	(2)	 	Individuals who, as of the date
hereof, constitute the Board of Directors of the Company (the
“Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any
individual who becomes a director subsequent to the date hereof
and whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without written objection to such nomination) shall be deemed to
be a member of the Incumbent Board; provided, further, that
notwithstanding the immediately preceding proviso, any
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or contests by or on behalf of a Person,
other than the Board of Directors

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	 	 	 	of the Company, shall not be deemed to be a member of the
Incumbent Board; or

	 	(3)	 	Consummation of a reorganization,
merger, share exchange or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case, unless,
following such Business Combination: (a) all or substantially
all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 65% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; (b) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from the Business Combination)
beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination; and (c) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board immediately prior to the time of
the execution of the initial agreement, or of the action of the
Board of Directors of the Company, providing for such Business
Combination; or
	 
	 	(4)	 	Approval by the stockholders of
the Company of a complete liquidation or dissolution of the
Company.

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	 	(G)	 	Good Reason. Executive will be deemed to have
terminated his employment for “Good Reason” if he tenders his
resignation to the Company following the occurrence of any one or more
of the following, without Executive’s prior written consent and the
Executive have not entered into a written agreement that replaces this
Agreement: (i) Executive is not reelected to or is removed as Chairman
of the Company; (ii) the Company fails to vest Executive with or
removes from him the duties, responsibilities, authority or resources
that he reasonably needs to competently perform his duties as Chairman
of the Company; (iii) the Company changes the primary location of
Executive’s employment to a place that is more than 50 miles from
Southfield, Michigan; or (iv) the Company otherwise commits a material
breach of its obligations under this Agreement and fails to cure the
breach within 30 days after Executive gives the Company written notice
of the breach.

     4. Other Benefits. The Executive shall also be entitled to such additional benefits as
outlined in the Manual during the Employment Term or severance period, with the exception of 401(k)
participation during the severance period.

     5. Employment Term. The period of the Executive’s employment by the Company under this
Agreement (the “Employment Term”) shall commence on January 1, 2006 and terminate on December 31,
2008, or such earlier date upon the occurrence of any of the following events:

	 	(A)	 	the death or retirement of the Executive;
	 
	 	(B)	 	the date on which the Company discharges the Executive by
reason of the Executive’s Total Disability. For purposes of this Agreement,
“Total Disability” shall have the same meaning as used in the Manual and
consistent with the Long Term Disability Benefits of the Company;
	 
	 	(C)	 	a mutual written agreement between the Company and the
Executive regarding an early termination date; or
	 
	 	(D)	 	the date on which the Company terminates the Executive’s
employment for Cause as recited in Section 3(E)(3).

In the event this Agreement terminates because of the Executive’s death, the Company agrees to pay
the Executive’s estate or his designee, 50% of the Executive’s Base Salary for the months remaining
in the Employment Term. This payment shall be made in accordance with the normal payroll practices
of the Company then in effect.

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     6. Confidential Information Agreement. Executive agrees that the Confidential Information
Agreement executed by him and dated March 12, 1975 (the “Confidential Information Agreement”),
which includes, not by way of limitation, covenants not to compete with the Company and covenants
to refrain from soliciting employees to leave the Company’s employment, shall remain in full force
and effect.

     7. Covenant not to Compete or Solicit Employees. In the event severance becomes payable to
Executive following a Change in Control, Executive agrees to the restrictive covenants of this
Section:

	 	(A)	 	Executive agrees that, for two (2) years following the
termination of Executive’s employment under circumstances described in Section
3(E)(2), he will not, without the Company’s prior written consent, directly or
indirectly Compete with the Company or any of its subsidiaries. For the
purposes of Section 7(A):

	 	(1)	 	“Compete” means directly or
indirectly owning, managing or operating a Competitor, which
solicits or obtains business of the Company, or directly or
indirectly serving as an employee, officer or director of or a
consultant to a Competitor which solicits or obtains business of
the Company, or soliciting or inducing any employee or agent of
the Company to terminate employment with the Company or any of
its subsidiaries and become employed by a Competitor.
	 
	 	(2)	 	“Competitor” means any person,
firm, partnership, corporation, trust or other entity that owns,
controls or is an insurance company or a or similar financial
services company (a “Financial Services Company”).

	 	(B)	 	In the event that a successor to the Company
succeeds to or assumes the Company’s rights and obligations under this
Agreement, Section 7(A) will apply only to the Company as it existed
immediately before the succession or assumption occurred and will not
apply to any of the successor’s other offices.
	 
	 	(C)	 	Section 7(A) will not prohibit Executive from
directly or indirectly owning or acquiring any capital stock or similar
securities that are listed on a securities exchange or quoted on the
Nasdaq or NYSE and do not represent more than 5% of the outstanding
capital stock of any Financial Services Company.
	 
	 	(D)	 	Executive agrees that a violation of this
Section 7 would result in direct, immediate and irreparable harm to the
Company, and

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	 	 	 	in such event, agrees that the Company, in addition to their other
rights and remedies, would be entitled to injunctive relief
enforcing the terms and provisions of this Section 7 and a return
to the Company of any severance payments under Section 3(E)(2).
The terms of this Section are intended to be in addition to any
restrictions contained in the Confidential Information Agreement.

     8. Binding Effect; Assignment. The Company may assign this Agreement to any of its affiliates
or their successors or assigns. This Agreement shall be binding upon and shall inure to the benefit
of the Company, its affiliates and their successors and assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Executive. Neither this Agreement nor any right or
interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal
representatives.

     9. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by the Executive and the
Company. No waiver by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any or subsequent time. No agreement or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which are not expressly
set forth in this Agreement. This Agreement shall supersede the Executive’s Employment Agreement
(including the Amendment dated April 1, 2005) dated January 1, 2004.

     10. Notices. All notices or other communications required or permitted hereunder shall be
given in writing and shall be deemed sufficient if delivered by hand (including by courier), mailed
by registered or certified mail, postage prepaid (return receipt requested), or sent by facsimile
transmission, as follows:

	 	 	 
	If to the Executive:

	 	If to the Company:
	 
	 	 
	To the address on file

	 	MEADOWBROOK, INC
	with the Company’s

	 	Attn: Human Resources
	Human Resources

	 	26600 Telegraph Road, Suite 300
	Department as the

	 	Southfield, MI 48034
	Executive’s home address.
	 	 

or such other address as shall be furnished in writing by such party, and any such notice or
communication shall be effective and be deemed to have been given as of the date so delivered or,
if mailed upon receipt thereof; provided, however, that any notice or communication changing any of
the addresses set forth above shall be effective and deemed given only upon its receipt.

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     11. Severability. If any provision of this Agreement, or any application thereof to any
circumstance, is invalid, in whole or in part, such provision or application shall to that extent
be severable and shall not affect other provisions or applications of this Agreement.

     12. Governing Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of Michigan, excluding any choice of law rule requiring application of the law or
any other jurisdiction. Any action arising out of or relating to this Agreement, its performance,
enforcement or breach, will be venued in the Circuit Court for the County of Oakland, State of
Michigan.

     13. Entire Agreement. This Agreement and the Confidential Information Agreement, which is
incorporated herein by reference, sets forth the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior and contemporaneous agreements,
written or oral, between them as to such subject matter.

     14. Headings. The headings contained herein are solely for the purpose of reference, are not
part of this Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on this
3rd day of March, 2006.

	 	 	 	 	 
	 	MEADOWBROOK INSURANCE GROUP, INC.

 	 
	 	/s/ Robert S. Cubbin
 	 
	 	By:  Robert S. Cubbin 	 
	 	Its:  President & CEO 	 
	 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on this
3rd day of March, 2006.

	 	 	 	 	 
	 	MEADOWBROOK, INC.

 	 
	 	/s/ Robert S. Cubbin
 	 
	 	By:  Robert S. Cubbin 	 
	 	Its:  President 	 
	 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on this
3rd day of March, 2006.

	 	 	 	 	 
	 	 	 
	 	     /s/ Merton J. Segal
 	 
	 	Merton J. Segal 	 
	 	 	 
	 

10<PAGE>
                                                                   EXHIBIT 10.06

                             LACROSSE FOOTWEAR, INC.
                  2001 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN,
                             AS AMENDED AND RESTATED

SECTION 1. ESTABLISHMENT

      LACROSSE FOOTWEAR, INC. (the "Company") hereby establishes a stock option
plan for non-employee directors, as described herein, which shall be known as
the "LACROSSE FOOTWEAR, INC. 2001 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, as
AMENDED AND RESTATED" (the "Plan"). It is intended that only nonstatutory stock
options may be granted under the Plan.

SECTION 2. PURPOSE

      The purpose of the Plan is to promote the long-term growth and financial
success of the Company. The Plan is intended to secure for the Company and its
shareholders the benefits of the long-term incentives inherent in increased
common stock ownership by members of the Board who are not employees of the
Company or its Affiliates. It is intended that the Plan will induce and
encourage highly experienced and qualified individuals to serve on the Board and
assist the Company in promoting a greater identity of interest between the
Non-employee Directors and the shareholders of the Company.

SECTION 3. DEFINITIONS

      The following terms shall have the respective meanings set forth below,
unless the context otherwise requires:

      (a) "Affiliate" shall mean any corporation, partnership, joint venture, or
other entity in which the Company holds an equity, profit, or voting interest of
more than fifty percent (50%).

      (b) "Board" shall mean the Board of Directors of the Company.

      (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

      (d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

      (e) "Fair Market Value per Share" shall mean for any day the average of
the high and low sales prices for a Share in the over-the-counter market, as
reported by the Nasdaq Stock Market on the business day immediately preceding
such day, or, if there were no trades of Shares on such business day, on the
most recent preceding business day on which there were trades. If Shares are not
listed or admitted to trading on the Nasdaq Stock Market when the determination
of fair market value is to be made, Fair Market Value per Share shall be the
mean between the highest and lowest reported sales prices of Shares on that date
on the principal exchange on which the Shares are then listed. If the Shares are
not listed on any national exchange, Fair

<PAGE>

Market Value per Share shall be the amount determined in good faith by the Board
to be the fair market value of a Share at the relevant time.

      (f) "Non-employee Director" shall mean a member of the Board who is not an
employee of the Company or any Affiliate.

      (g) "Shares" shall mean shares of common stock of the Company, $.01 par
value per share, and such other securities or property as may become subject to
Options pursuant to an adjustment made under Section 11 of the Plan.

SECTION 4. EFFECTIVE DATE OF THE PLAN

      The effective date of the Plan is the date of its adoption by the Board,
December 11, 2000, subject to the approval and ratification of the Plan by the
shareholders of the Company, and any and all awards made under the Plan prior to
such approval shall be subject to such approval.

SECTION 5. SHARES AVAILABLE FOR OPTIONS

      Subject to adjustment in accordance with the provisions of Section 11, the
number of Shares which may be issued pursuant to the Plan shall not exceed
100,000. Such Shares may be authorized and unissued Shares or treasury shares.
If, after the effective date of the Plan, any Options terminate, expire or are
canceled prior to the delivery of all of the Shares issuable thereunder, then
the number of Shares counted against the number of Shares available under the
Plan in connection with the grant of such Option, to the extent of any such
termination, expiration or cancellation, shall again be available for the
granting of additional Options under the Plan. If the exercise price of any
Option granted under the Plan is satisfied by tendering Shares (by either actual
delivery or by attestation), only the number of Shares issued net of the Shares
tendered shall be deemed delivered for purposes of determining the maximum
number of Shares available for delivery under the Plan.

SECTION 6.  PLAN OPERATION

      (a) Formula Plan. The Plan is intended to meet the "formula" plan
requirements of Rule 16b-3 (or any successor provision thereto), as interpreted,
adopted under the Exchange Act and accordingly is intended to be self-governing.

      (b) Administration. The Plan shall be administered by the Board. The Board
may, by resolution, delegate part or all of its administrative powers with
respect to the Plan. The Board shall have all of the powers vested in it by the
terms of the Plan, such powers to include the authority, within the limits
prescribed herein, to establish the form of the agreement embodying grants of
Options made under the Plan. The Board shall, subject to the provisions of the
Plan, have the power to construe the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable, such administrative
decisions of the Board to be final and conclusive. Except to the extent
prohibited by applicable law, the Board may authorize any one or more of their
number or the

                                       2
<PAGE>

Secretary or any other officer of the Company to execute and deliver documents
on behalf of the Board.

SECTION 7. NONSTATUTORY STOCK OPTION AWARDS TO NON-EMPLOYEE DIRECTORS

      (a) Eligibility. Non-employee Directors shall automatically be granted
Options under the Plan in the manner set forth in this Section 7 for no cash
consideration. A Non-employee Director may hold more than one Option under the
Plan in his or her capacity as a Non-employee Director of the Company, but only
on the terms and subject to the conditions set forth herein. All options granted
to Non-employee Directors pursuant to the Plan shall be nonstatutory stock
options which do not qualify for special tax treatment under Code Sections 421
or 422.

      (b) Grants.

      (i) Initial Grant. Any person who first becomes a new Non-Employee
Director after January 1, 2004, but prior to January 1, 2005, shall be granted
an option (an "Option") to purchase three thousand (3,000) Shares under the Plan
upon the latter of first becoming a Non-Employee Director or May 4, 2004. Any
person who first becomes a new Non-Employee Director on or after January 1, 2005
shall be granted an Option to purchase five thousand (5,000) Shares under the
Plan upon first becoming a Non-Employee Director.

      (ii) Annual Grants. On the first business day of January in each of 2001,
2002, 2003 and 2004, each Non Employee Director at such time shall be granted an
Option to purchase three thousand (3,000) Shares under the Plan. On the first
business day of January 2005 and on the first business day of January in each
calendar year thereafter so long as the Plan remains in effect and a sufficient
number of Shares are available under the Plan, each Non employee Director at
such time shall be granted an Option to purchase five thousand (5,000) Shares
under the Plan.

      (iii) Terms. The price per Share of the Company's common stock which may
be purchased upon exercise of an Option shall be one hundred percent (100%) of
the Fair Market Value per Share on the date the Option is granted. Such exercise
price shall be subject to adjustment as provided in Section 11 hereof. The term
of each Option granted to a Non employee Director shall be for ten (10) years
from the date of grant, unless terminated earlier pursuant to the provisions of
Section 9 hereof.

      (c) Option Agreement. Each Option granted under the Plan shall be
evidenced by a written agreement in such form as the Board shall from time to
time adopt. Each agreement shall be subject to, and incorporate, by reference or
otherwise, the applicable terms of the Plan.

      (d) Option Period. No Option shall be granted under the Plan after the
tenth anniversary of the effective date of the Plan. However, the term of any
Option theretofore granted may extend beyond such date. Options shall
automatically be granted to Non-employee Directors under the Plan only for so
long as the Plan remains in effect and a sufficient number of Shares are
available hereunder for the granting of such Options.

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<PAGE>

      (e) Vesting. Except as otherwise provided in Section 9 hereof, an Option
cannot be exercised prior to the first anniversary of the date of grant and
thereafter may only be exercised with respect to twenty percent (20%) of the
Option Shares on and after the first anniversary of the date of grant, with
respect to forty percent (40%) of the Option Shares on a cumulative basis on and
after the second anniversary of the date of grant, with respect to sixty percent
(60%) of the Option Shares on a cumulative basis on and after the third
anniversary of the date of grant, with respect to eighty percent (80%) of the
Option Shares on a cumulative basis on and after the fourth anniversary of the
date of grant and in full on and after the fifth anniversary of the date of
grant.

SECTION 8. EXERCISE OF OPTION

      An Option may be exercised, subject to limitations on its exercise and the
provisions of Section 9, from time to time, only by (i) providing written notice
of intent to exercise the Option with respect to a specified number of Shares;
and (ii) payment in full to the Company of the exercise price at the time the
Option is exercised (except that, in the case of an exercise under paragraph
(iii) below, payment may be made as soon as practicable after the exercise).
Payment of the exercise price may be made:

      (i) in cash or by certified check,

      (ii) by delivery to the Company of Shares which shall have been owned for
at least six (6) months and have a Fair Market Value per Share on the date of
surrender equal to the exercise price, or

      (iii) by delivery (including by fax) to the Company or its designated
agent of a properly executed exercise notice together with irrevocable
instructions to a broker to sell or margin a sufficient portion of the Option
Shares and promptly deliver to the Company the sale or margin loan proceeds
required to pay the exercise price.

SECTION 9. EFFECT OF TERMINATION OF MEMBERSHIP ON THE BOARD

      The right to exercise an Option granted to a Non-employee Director shall
be limited as follows, provided the actual date of exercise is in no event after
the expiration of the term of the Option:

      (a) If a Non-employee Director ceases being a director of the Company for
any reason other than the reason identified in subparagraph (b) of this Section
9, the Options become immediately exercisable upon such date of termination and
the Non-employee Director shall have the right to exercise the Options within
twenty-four (24) months after such termination without regard to the vesting
restrictions of Section 7(e), subject to the condition that no Option shall be
exercisable after the expiration of the term of the Option; and

      (b) If a Non-employee Director ceases being a director of the Company due
to the director's voluntary decision to resign or voluntary decision not to
stand for reelection to the Board, in either case prior to reaching age 70, the
Non-employee Director may exercise the

                                       4
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Options, to the extent they were exercisable at the time of termination, for a
period of three (3) months after such termination of service, but in no event
beyond the expiration of the term of the Options.

SECTION 10. TRANSFERABILITY OF OPTIONS

      The Options and rights under the Options are not assignable, alienable,
saleable or transferable by a Non-employee Director otherwise than by will or by
the laws of descent and distribution, and may be exercised during the lifetime
of the Non-employee Director only by such individual or, if permissible under
applicable law, by such individual's guardian or legal representative, except
that a Non-employee Director may, to the extent allowed by the Board and in a
manner specified by the Board, (a) designate in writing a beneficiary to
exercise the Option after the Non-employee Director's death; and (b) transfer
any Option.

SECTION 11. CAPITAL ADJUSTMENT PROVISIONS

      In the event that the Board shall determine that any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or exchange
of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event (individually referred to as "Event" and
collectively referred to as "Events") affects the Shares such that an adjustment
is determined by the Board to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Board may, in such manner as it may deem equitable,
adjust any or all of (i) the number and type of Shares subject to the Plan and
which thereafter may be made the subject of Options under the Plan; (ii) the
number and type of Shares subject to outstanding Options; and (iii) the exercise
price with respect to any Option (collectively referred to as "Adjustments");
provided, however, that Options subject to grant or previously granted to
Non-employee Directors under the Plan at the time of any such Event shall be
subject to only such Adjustments as shall be necessary to maintain the
proportionate interest of the Non-employee Directors and preserve, without
exceeding, the value of such Options.

SECTION 12. AMENDMENT AND TERMINATION OF THE PLAN

      The Plan shall terminate on December 11, 2010, unless sooner terminated as
herein provided. The Board may at any time amend, alter, suspend, discontinue or
terminate the Plan. Termination of the Plan shall not affect the rights of
Non-employee Directors with respect to Options previously granted to them, and
all unexpired Options shall continue in force and effect after termination of
the Plan, except as they may lapse or be terminated by their own terms and
conditions. Any amendment to the Plan shall become effective when adopted by the
Board, unless specified otherwise. Rights and obligations under any Option
granted before any amendment of this Plan shall not be materially and adversely
affected by amendment of the Plan, except with the consent of the person who
holds the Option, which consent may be obtained in any manner that the Board
deems appropriate.

                                       5
<PAGE>

SECTION 13. GENERAL PROVISIONS

      (a) Other Compensation. Nothing contained in the Plan shall prevent the
Company or any Affiliate from adopting or continuing in effect other or
additional compensation arrangements for Non-employee Directors, and such
arrangements may be either generally applicable or applicable only in specific
cases.

      (b) Rights of Directors. The grant of an Option to a Non-employee Director
pursuant to the Plan shall confer no right on such Non-employee Director to
continue as a director of the Company. Except for rights accorded under the
Plan, Non-employee Directors shall have no rights as shareholders with respect
to Shares covered by any Option until the date of issuance of the stock
certificates to the Non-employee Director and only after such Shares are fully
paid. No adjustment will be made for dividends or other rights for which the
record date is prior to the date such stock is issued.

      (c) Securities Laws. Notwithstanding any other provision of the Plan, the
Company shall have no liability to deliver any Shares under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the applicable
requirements of any securities exchange or similar entity.

      (d) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the internal laws of the State of Wisconsin and applicable federal law.

      (e) Miscellaneous. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision hereof.

                                       6

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