Document:

exhibit10_1.htm

Exhibit 10.1

 

 

 

2004 LONG-TERM INCENTIVE COMPENSATION PLAN

 

(As approved by shareholders on October 29, 2009)

 

 

ARTICLE 1—GENERAL PROVISIONS

 

1.1         Establishment of Plan. Cree, Inc., a North Carolina corporation (the “Company”), hereby establishes an incentive compensation plan to be known as the “Cree, Inc.
2004 Long-Term Incentive Compensation Plan” (the “Plan”), as set forth in this document.

 

1.2         Purpose of Plan. The objectives of the Plan are to (i) attract and retain employees for the Company and its affiliates and directors of the Company by providing competitive compensation
opportunities; (ii) provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its affiliates; and (iii) align the long-term financial interests of employees and directors with those of the Company’s shareholders.

 

1.3         Types of Awards. Awards under the Plan may be made to Eligible Participants who are employees in the form of (i) Incentive Stock Options, (ii) Nonqualified Stock Options, (iii)
Stock Appreciation Rights, (iv) Restricted Stock, (v) Stock Units, (vi) Performance Units, or any combination of these. Awards under the Plan may be made to Eligible Participants who are Outside Directors in the form of (i) Nonqualified Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Stock Units, or any combination of these, subject to and in accordance with Section 4.2 and Article 10.

 

1.4         Effective Date. The Plan became effective upon approval of the Plan by the Company’s shareholders on November 4, 2004, and the date of such approval is referred to herein
as the “Effective Date.”

 

1.5         Predecessor Plan. Upon approval of the Plan by the shareholders of the Company, no further grants may be made under the Cree, Inc. Amended and Restated Equity Compensation Plan
(the “Predecessor Plan”).

 

ARTICLE 2—DEFINITIONS

 

Except where the context otherwise indicates, the following definitions apply:

 

2.1         “Award Agreement” means the written agreement, whether in printed or electronic form, between the Company and a Participant, evidencing an Award granted to the Participant under the Plan. The Award Agreement may be in the
form of a master agreement between an Eligible Participant and the Company with respect to all or any types of Awards supplemented, with respect to a particular Award, by a notice of award issued by the Company.

 

2.2         “Award” means an award granted to a Participant under the Plan that is an Option, Stock Appreciation Right, Restricted Stock, Stock Unit, Performance Unit or combination of these.

 

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

 

2.4         “Cause” means, unless provided otherwise in the Award Agreement or the Plan: (i) “Cause” as defined in an Individual Agreement to which a Participant is a party that is then in effect, or (ii) if there is no such
Individual Agreement or if it does not define Cause, termination of the Participant’s employment by the Company or any other Employer because of any conduct amounting to fraud, dishonesty, willful misconduct, negligence, significant activities materially harmful to the reputation of the Company or an Employer, insubordination or conviction of a felony or a crime involving moral turpitude, all as determined by the Committee in good faith, including but not limited to (as determined by the Committee in good
faith), (A) Participant’s breach of any agreement between Participant and an Employer, (B) Participant’s intentional or 

 

 

 

 

 

 

negligent failure to perform a reasonably requested directive or assignment or to perform his duties to the Employer substantially in accordance with the Employer’s operating and personnel policies and procedures generally applicable to all of its employees, or (C) Participant’s misappropriation or attempted misappropriation of
any of the Employer’s funds or property.

 

2.5         “Change in Control” means, unless provided otherwise in the Award Agreement, “Change in Control” or “Change of Control”, as applicable, as defined in an Individual Agreement to which a Participant
is a party that is then in effect.  If a Participant does not have an Individual Agreement, or if it does not define Change in Control, no Termination of Employment for that Participant shall be considered to be in connection with a Change in Control.

 

2.6         “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

 

2.7         “Committee” means a committee appointed by the Board to administer this Plan (or any specific provisions hereunder) pursuant to Article 3.

 

2.8         “Company” means Cree, Inc., a North Carolina corporation, and its successors and assigns.

 

2.9         “Disability” means, with respect to any Incentive Stock Option, disability as determined under Section 22(e)(3) of the Code, and with respect to any other Award, unless provided otherwise in the Award Agreement, (i) with
respect to a Participant who is eligible to participate in the Employer’s program of long-term disability insurance, if any, a condition with respect to which the Participant is entitled to commence benefits under such program of long-term disability insurance and which results in Termination of Employment of the Participant, and (ii) with respect to any Participant (including a Participant who is eligible to participate in the Employer’s program of long-term disability insurance, if any), a disability
as determined under procedures established by the Committee or in any Award.

 

2.10         “Effective Date” shall have the meaning ascribed to such term in Section 1.4 hereof.

 

2.11         “Eligible Participant” means any employee of the Employer and any Outside Director, subject to such limitations as may be provided by the Code, the Exchange Act or the Committee, as shall be determined by the Committee.

 

2.12         “Employer” means the Company and any corporation or entity in which the Company owns or controls, directly or indirectly, fifty percent (50%) or more of the voting power or economic interests of such corporation or entity.

 

2.13         “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. All citations to sections of the Exchange Act or rules thereunder are to such sections or rules as they may from time to
time be amended or renumbered.

 

2.14         “Fair Market Value” means the fair market value of a Share, as determined in good faith by the Committee; provided, however, that unless otherwise directed by the Committee:

 

(a) if the Shares are listed for trading on a national securities exchange, Fair Market Value on any date shall be the last sale price reported for the Shares on such exchange on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported;

 

(b) if the Shares are listed for trading on The Nasdaq Stock Market and have been designated as a “Nasdaq Global Market” security (or such other name as The Nasdaq Stock Market may hereafter adopt for such segment), Fair Market Value on any date shall be the last sale price reported
for the Shares on such system during the regular trading session on such date or on the last day preceding such date on which a sale was reported during the regular trading session;

 

 

 

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(c) if the Shares are listed for trading on The Nasdaq Stock Market and have not been designated under subsection (b) above, Fair Market Value on any date shall be the average of the highest bid and lowest asked prices of the Shares on such system during the regular trading session on such
date or on the last day preceding such date on which a sale was reported during the regular trading session; or

 

(d) if (a), (b) and (c) do not apply, on the basis of the good faith determination of the Committee.

 

For purposes of subsection (a) above, if the Shares are traded on more than one national securities exchange, then the following exchange shall be referenced to determine Fair Market Value: (i) the New York Stock Exchange if the Shares are then traded on such exchange and (ii) otherwise such other exchange on which Shares are traded as may
be designated by the Committee.

 

2.15         “Good Reason” means a Termination of Employment for “Good Reason” as defined in an Individual Agreement to which the Participant is a party that is then in effect.  If a Participant does not have an
Individual Agreement, or if it does not define Good Reason, no Termination of Employment for that Participant shall be considered to be for “Good Reason.”

 

2.16         “Incentive Stock Option” or “ISO” means an Option granted to an Eligible Participant under Article 5 of the Plan which meets the requirements of Section 422 of the Code.

 

2.17              “Individual Agreement” means a written agreement between a Participant and the Company or any other Employer relating to employment by the Company or other Employer or to service as an Outside Director
of the Company (other than an Award Agreement).

 

2.18               “Insider” shall mean an individual who is, on the relevant date, subject to the reporting requirements of Section 16(a) of the Exchange Act.

 

2.19         “Nonqualified Stock Option” or “NQSO” means an Option granted to an Eligible Participant under Article 5 of the Plan that does not meet the requirements of Section 422 of the Code.

 

2.20         “Option” means an Incentive Stock Option or a Nonqualified Stock Option. An Option shall be designated in the applicable Award Agreement as either an Incentive Stock Option or a Nonqualified Stock Option, and in the absence
of such designation, shall be treated as a Nonqualified Stock Option.

 

2.21         “Option Price” means the price at which a Participant may purchase a Share pursuant to an Option.

 

2.22         “Outside Director” means a member of the Board who is not an employee of the Company or any other Employer.

 

2.23         “Participant” means an Eligible Participant to whom an Award has been granted.

 

2.24         “Payment Date” shall have the meaning set forth in Section 5.6 of the Plan.

 

2.25         “Performance Unit” means an Award under Article 8 of the Plan that has a value set by the Committee (or that is determined by reference to a valuation formula specified by the Committee), which value may be paid to the Participant
by delivery of such property as the Committee shall determine, including without limitation, cash or Shares, or any combination thereof, upon achievement of such performance objectives during the relevant performance period as the Committee shall establish at the time of such Award or thereafter, but not later than the time permitted by Section 162(m) of the Code in the case of Awards intended to comply with Section 162(m) of the Code.

 

2.26         “Plan” means the Cree, Inc. 2004 Long-Term Incentive Compensation Plan, as amended from time to time.

 

 

 

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2.27         “Restricted Stock” means an Award of Shares under Article 7 of the Plan, which Shares are issued with such restriction(s) as the Committee, in its sole discretion, may impose, including without limitation, any restriction
on the right to retain such Shares, to sell, transfer, pledge or assign such Shares, to vote such Shares, and/or to receive any cash dividends with respect to such Shares, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

2.28         “Restriction Period” means the period of any restriction applicable to an Award of Restricted Stock or Stock Units, which period shall commence on the date an Award of Restricted Stock or Stock Units is granted and end on
such date as the Committee shall determine (subject to Sections 7.2(b) and Section 14.2).

 

2.29         “Retirement” means, unless provided otherwise in the Award Agreement, Termination of Employment other than for Cause after a Participant has reached the age of 55 years and has completed at least five years of service (full-time
or full-time equivalent).

 

2.30         “Share” means one share of common stock, par value $0.00125 per share, of the Company, as such Share may be adjusted pursuant to the provisions of Section 4.3 of the Plan.

 

2.31         “Stock Appreciation Right” or “SAR” means an Award granted under Article 6 which provides for an amount payable in Shares and/or cash, as determined by the Committee, equal to the excess of the Fair Market Value
of a Share on the day the Stock Appreciation Right is exercised over the specified purchase price.

 

2.32         “Stock Unit” means an Award under Article 7 of the Plan that is valued by reference to a Share, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including without
limitation, cash or Shares, or any combination thereof, and that has such restriction(s) as the Committee, in its sole discretion, may impose, including without limitation, any restriction on the right to retain such Awards, to sell, transfer, pledge or assign such Awards, and/or to receive any cash dividend equivalents with respect to such Awards, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

2.33         “Termination of Employment” means, unless provided otherwise in the Award Agreement, the discontinuance of employment of a Participant with the Employer for any reason, whether voluntary or involuntary, or in the case of
an Outside Director, the discontinuance of services to the Company by an Outside Director, for any reason, whether voluntary or involuntary.  If an Outside Director becomes an employee of the Company or any other Employer before or upon terminating service as an Outside Director, such employment will constitute a continuation of service with respect to Awards granted to the Participant while he or she served as a member of the Board.  The determination of whether a Participant has discontinued
employment or service shall be made by the Committee in its sole discretion.  “Termination of Service” as used in an Award Agreement shall mean Termination of Employment.

 

ARTICLE 3—ADMINISTRATION

 

3.1         Composition of Committee. This Plan shall be administered by the Committee. The Committee shall consist of two or more Outside Directors who shall be appointed by the Board. The
Board shall fill vacancies on the Committee and may from time to time remove or add members of the Committee. The Board, in its sole discretion, may exercise any authority of the Committee under this Plan in lieu of the Committee’s exercise thereof and in such instances references herein to the Committee shall refer to the Board of Directors. Unless the Board directs otherwise, the Compensation Committee of the Board shall serve as the Committee.

 

3.2         Authority of the Committee.

 

(a) The Committee shall have the exclusive right to interpret, construe and administer the Plan, to select the persons who are eligible to receive an Award, and to act in all matters pertaining to the granting of an Award and the contents of the Award Agreement evidencing the Award, including
without limitation, the 

 

 

 

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determination of the number of Options, Stock Appreciation Rights, Restricted Stock, Stock Units or Performance Units subject to an Award and the form, terms, conditions and duration of each Award, and any amendment thereof consistent with the provisions of the Plan. The Committee may adopt such rules, regulations and procedures of general
application for the administration of this Plan as it deems appropriate. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry it into effect.

 

(b) The Committee shall have the discretion to determine the effect upon an Award and upon an individual’s status as an employee or Outside Director under the Plan (including whether a Participant shall be deemed to have experienced a Termination of Employment, or other change in status)
and upon the vesting, expiration or forfeiture of an Award in the case of (i) any individual who is employed by an entity that ceases to qualify as an Employer, (ii) any leave of absence, (iii) any transfer between locations of employment with the Employer or between Employers, (iv) any change in the Participant’s status from an employee to a consultant or member of the Board of Directors, or vice versa, and (v) any employee who, at the request of the Employer or the Company, becomes employed by any partnership,
joint venture, corporation or other entity not meeting the requirements of an Employer.

 

(c) All actions, determinations and decisions of the Committee made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions
thereof, shall be conclusive, final and binding upon all parties, including the Company, its shareholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Committee shall consider such factors as it deems relevant to making or taking such actions, determinations and decisions including, without limitation, the recommendations or advice of any director, officer or employee of the Company and such attorneys, consultants and accountants as it may select. A Participant or
other holder of an Award may contest an action, determination or decision by the Committee with respect to such person or Award only on the grounds that such action, determination or decision was arbitrary or capricious or was unlawful, and any review of such action, determination or decision shall be limited to determining whether the Committee’s decision or action was arbitrary or capricious or was unlawful.

 

3.3         Rules for Foreign Jurisdictions. Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole discretion, amend or vary the terms of the Plan in order to
conform such terms with the requirements of each non-U.S. jurisdiction where an Eligible Participant is located or to meet the goals and objectives of the Plan; establish one or more sub-plans for these purposes; and establish administrative rules and procedures to facilitate the operation of the Plan in such non-U.S. jurisdictions. For purposes of clarity, the terms and conditions contained herein which are subject to variation in a non-U.S. jurisdiction shall be reflected in a written addendum to the Plan for
each Employer of a Participant located in such non-U.S. jurisdiction.

 

3.4         Delegation of Authority. The Committee may, at any time and from time to time, to the extent permitted by law and the Company’s Bylaws and subject to the applicable rules
of any securities exchange or quotation or trading system on which Shares are traded, delegate to one or more members of the Committee or executive officers of the Company any or all of its authority under Section 3.2 and 3.3, except that the Committee may not delegate such authority with respect to Awards to members of the Board or to executive officers of the Company. The Committee may delegate the administration of the Plan to an officer or employee of the Company, and such administrator(s) may have the authority
to prepare, execute and distribute Award Agreements or other documents relating to Awards granted by the Committee under the Plan, to maintain records relating to the grant, vesting, exercise, forfeiture or expiration of Awards, to process or oversee the issuance of Shares upon the exercise, vesting and/or settlement of an Award, to interpret the terms of Awards and to take such other actions as the Committee may specify, provided that the actions and interpretations of any such administrator shall be subject
to review and approval, disapproval or modification by the Committee.

 

3.5         Award Agreements. Each Award granted under the Plan shall be evidenced by an Award Agreement. Each Award Agreement shall be subject to and incorporate, by reference or otherwise,
the applicable terms and 

 

 

 

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conditions of the Plan, and any other terms and conditions, not inconsistent with the Plan, as may be directed by the Committee, including without limitation, provisions related to the consequences of Termination of Employment. A copy of such document shall be provided to the Participant, and the Committee may, but need not, require that the
Participant sign a copy of the Award Agreement or otherwise confirm the Participant’s acceptance of the provisions of the Award Agreement. The Participant shall in any event be deemed to have accepted the provisions of an Award Agreement delivered to the Participant with respect to an Award by exercising the Award or receiving any benefits thereunder.

 

3.6         Indemnification. In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee and any persons
acting on its behalf pursuant to authority delegated by the Committee shall be indemnified by the Company against reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement
thereof, provided such settlement is approved by independent legal counsel selected by the Company, or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except as to matters as to which the person seeking indemnification has been negligent or engaged in misconduct in the performance of his or her duties; provided, that within sixty (60) days after institution of any such action, suit or proceeding, the person seeking indemnification shall in writing offer the Company the opportunity,
at its own expense, to handle and defend the same.

 

ARTICLE 4—SHARES SUBJECT TO THE PLAN

 

4.1         Aggregate Limits.

 

(a) Subject to adjustment as provided in Section 4.3, the aggregate number of Shares which may be issued pursuant to Awards under this Plan is (i) 11,200,000 plus (ii) the number of Shares which, immediately prior to the Effective Date, were authorized for issuance under the Predecessor Plan
and are not thereafter used for awards under the Predecessor Plan. Shares described in clause (ii) above include Shares which, immediately prior to the Effective Date, were authorized for issuance under the Predecessor Plan and either (x) were not subject to then outstanding awards or (y) were subject to then outstanding awards that subsequently expire, are canceled or otherwise terminate unexercised for any reason.

 

(b) Subject to adjustment as provided in Section 4.3, no more than an aggregate of 1,400,000 Shares authorized by subsection (a) may be issued pursuant to Awards of Restricted Stock, Stock Units or Performance Units.

 

(c) If for any reason any Shares awarded or subject to purchase under this Plan are not delivered or purchased, or are reacquired by the Company, for reasons including, but not limited to, a forfeiture of Restricted Stock or a Stock Unit or the termination, expiration or cancellation of an
Option, Stock Appreciation Right or Performance Unit, such Shares shall again be available for issuance pursuant to an Award under the Plan, except that Shares with respect to which a Stock Appreciation Right is exercised, and Shares withheld for payment of taxes pursuant to Section 13.2, shall not thereafter be available for issuance under the Plan.  The determination of the number of issued Shares that again become available for issuance with respect to grants of Incentive Stock Options pursuant to
this Section 4.1 shall be made in accordance with the requirements of Treas. Reg. section 1.422-2(b)(3).

 

4.2         Individual Limits.

 

(a) Tax Code Limits. Except to the extent the Committee determines that an Award shall not comply with the performance-based compensation provisions of Section 162(m) of the Code: (i) the aggregate number of Shares subject to Options
or Stock Appreciation Rights granted under this Plan in any one fiscal year to any one Participant shall not exceed 300,000; (ii) the aggregate number of Shares subject to Restricted Stock or Stock Unit Awards granted under this Plan in any one fiscal year to any one Participant 

 

 

 

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shall not exceed 100,000; and (iii) the aggregate value of Performance Unit Awards (valued as of the grant date) that may be granted in any one fiscal year to any one Participant shall not exceed the Fair Market Value of 100,000 Shares.

 

(b) Awards to Outside Directors. Awards to Outside Directors may be in the form of Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units or a combination thereof. The aggregate number of Shares subject
to Restricted Stock or Stock Units granted under this Plan in any one fiscal year to any Outside Director shall not exceed 10,000.  The aggregate number of Shares subject to Awards of any type granted under this Plan in any one fiscal year to any Outside Director shall not exceed 20,000.

 

4.3         Adjustment of Shares. If any change in corporate capitalization, such as a stock split, reverse stock split, or stock dividend; or any corporate transaction such as a reorganization,
reclassification, merger or consolidation or separation, including a spin-off, of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company’s corporate structure, or any distribution to shareholders (other than a cash dividend) results in the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock
or other securities of any other corporation (including unpaired shares replacing paired Shares); or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of outstanding Shares; then equitable adjustments shall be made by the Committee, as it determines are necessary and appropriate, in:

 

(a) the number of Shares that may be awarded as set forth in Section 4.1;

 

(b) the limitations on the aggregate number of Shares that may be awarded to any one single Participant as set forth in Section 4.2;

 

(c) the number and class of Shares that may be subject to an Award, and which have not been issued or transferred under an outstanding Award;

 

(d) the Option Price under outstanding Options and the number of Shares to be transferred in settlement of outstanding Stock Appreciation Rights; and

 

(e) the terms, conditions or restrictions of any Award and Award Agreement, including the price payable for the acquisition of Shares; provided, however, that all such adjustments made in respect of each ISO shall be accomplished so that such Option shall continue to be an incentive stock
option within the meaning of Section 422 of the Code.

 

ARTICLE 5—STOCK OPTIONS

 

5.1         Grant of Options. Subject to the provisions of the Plan, Options may be granted to Eligible Participants at any time and from time to time as shall be determined by the Committee.
The Committee shall have sole discretion in determining the number of Shares subject to Options granted to each Participant. The Committee may grant a Participant ISOs, NQSOs or a combination thereof, and may vary such Awards among Participants; provided that only an employee may be granted ISOs.

 

5.2         Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option
pertains and such other provisions as the Committee shall determine. The Award Agreement shall further specify whether the Award is intended to be an ISO or an NQSO. Any portion of an Option that is not designated as an ISO or otherwise fails or is not qualified as an ISO (even if designated as an ISO) shall be an NQSO.

 

5.3         Option Price. The Option Price for each grant of an Option shall not be less than the Fair Market Value of a Share on the date the Option is granted.

 

 

 

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5.4         Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than
the seventh (7th) anniversary of its grant date.

 

5.5         Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance
approve, including conditions related to the employment of or provision of services by the Participant with the Company or any Employer, which need not be the same for each grant or for each Participant. The Committee may provide in the Award Agreement and/or an Individual Agreement that vesting of the Award shall accelerate or other restrictions applicable to the Award shall lapse only:  (i) in the event of the Participant’s death, Disability, or Retirement, in connection with a Change of Control,
or pursuant to Section 14.5; (ii) for any Award granted on or before June 29, 2008, in the event of the Participant’s Termination of Employment by the Company without Cause or by the Participant for Good Reason; or (iii) in any other circumstance, provided that the number of Shares subject to Awards granted pursuant to this clause (iii), plus the number of Shares subject to Awards granted pursuant to clause (ii) of the third sentence of Section 6.4, clause (iii) of the first sentence of Section 7.2(b) and
clause (ii) of the second sentence of Section 8.3, does not exceed five percent (5%) of the number of shares authorized for grant under this Plan.  In addition, the Committee may provide in the Award Agreement for the deferral of gains related to an exercise or may establish a cap on the maximum earnings a Participant can realize from exercise.

 

5.6         Payment. Options shall be exercised by the delivery of written or electronic notice of exercise to the Company or its designated representative, setting forth the number of Shares
with respect to which the Option is to be exercised and satisfying any requirements that the Committee may establish in or pursuant to the Award Agreement from time to time. Unless otherwise authorized by the Committee, no Shares shall be delivered, whether in certificated or uncertificated form, until the full Option Price has been paid. Full payment of the Option Price (less any amount previously received from the Participant to acquire the Option) must be made on or prior to the Payment Date, as defined below.
The Option Price shall be payable to the Company either: (a) in cash, (b) in a cash equivalent approved by the Committee, (c) if approved by the Committee, by tendering previously acquired Shares (or delivering a certification or attestation of ownership of such Shares) having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the tendered Shares must have been held by the Participant for any period required by the Committee), or (d) by a combination of (a),
(b) or (c). The Committee also may allow cashless exercises as permitted under Regulation T of the Federal Reserve Board, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law. “Payment Date” shall mean the date on which a sale transaction in a cashless exercise (whether or not payment is actually made pursuant to a cashless exercise) would have settled in connection with the subject
option exercise.

 

5.7         Nontransferability of Options.

 

(a) Incentive Stock Options. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted
to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.

 

(b) Nonqualified Stock Options. Except as otherwise provided in a Participant’s Award Agreement consistent with securities and other applicable laws, rules and regulations, no NQSO granted under this Article 5 may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, all NQSOs granted to a Participant under this Article 5 shall be exercisable during his or her lifetime only by such Participant.

 

5.8         Special Rules for ISOs. Notwithstanding the above, in no event shall any Participant who owns (within the meaning of Section 424(d) of the Code) stock of the Company possessing
more than ten percent (10%) of the total combined voting power of all classes of stock of the Company be eligible to receive an ISO at an Option 

 

 

 

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Price less than one hundred ten percent (110%) of the Fair Market Value of a share on the date the ISO is granted or be eligible to receive an ISO that is exercisable later than the fifth (5th) anniversary date of its grant. No Participant may be granted ISOs (under the Plan and all other incentive stock option plans of the Employer) which
are first exercisable in any calendar year for Shares having an aggregate Fair Market Value (determined as of the date an Option is granted) that exceeds $100,000.

 

ARTICLE 6—STOCK APPRECIATION RIGHTS

 

6.1         Grant of SARs. A Stock Appreciation Right may be granted to an Eligible Participant in connection with an Option granted under Article 5 of this Plan or may be granted independently
of any Option. A Stock Appreciation Right shall entitle the holder, within the specified period, to exercise the SAR and receive in exchange a payment having an aggregate value equal to the amount by which the Fair Market Value of a Share exceeds the exercise price, times the number of Shares with respect to which the SAR is exercised. A SAR granted in connection with an Option (a “Tandem SAR”) shall entitle the holder of the related Option, within the period specified for the exercise of the Option,
to surrender the unexercised Option, or a portion thereof, and to receive in exchange therefore a payment having an aggregate value equal to the amount by which the Fair Market Value of a Share exceeds the Option price per Share, times the number of Shares under the Option, or portion thereof, which is surrendered.

 

6.2         Tandem SARs. Each Tandem SAR shall be subject to the same terms and conditions as the related Option, including limitations on transferability, shall be exercisable only to the
extent such Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The grant of Stock Appreciation Rights related to ISOs must be concurrent with the grant of the ISOs. With respect to NQSOs, the grant either may be concurrent with the grant of the NQSOs, or in connection with NQSOs previously granted under Article 5, which are unexercised and have not terminated or lapsed.

 

6.3         Payment. The Committee shall have sole discretion to determine in each Award Agreement whether the payment with respect to the exercise of an SAR will be in the form of cash, Shares,
or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined based on the Fair Market Value of a Share on the date of exercise. If the Committee elects to make full payment in Shares, no fractional Shares shall be issued and cash payments shall be made in lieu of fractional shares. The Committee shall have sole discretion to determine in each Award Agreement the timing of any payment made in cash or Shares, or a combination thereof, upon exercise of SARs. Payment may
be made in a lump sum, in annual installments or may be otherwise deferred; and the Committee shall have sole discretion to determine in each Award Agreement whether any deferred payments may bear amounts equivalent to interest or cash dividends.

 

6.4         Duration, Exercise Price and Exercise of SARs.                                                                               Each
SAR shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no SAR shall be exercisable later than the seventh (7th) anniversary of its grant date.  The exercise price for each grant of an SAR shall not be less than the Fair Market Value of a Share on the date the SAR is granted. Upon exercise of an SAR, the number of Shares subject to exercise under any related Option shall automatically be reduced by the number of Shares represented by the Option or
portion thereof which is surrendered.  SARs granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, including conditions related to the employment of or provision of services by the Participant with the Company or any Employer, which need not be the same for each grant or for each Participant. The Committee may provide in the Award Agreement and/or an Individual Agreement that vesting of the Award shall
accelerate or other restrictions applicable to the Award shall lapse only:  (i) in the event of the Participant’s death, Disability, or Retirement, in connection with a Change of Control, or pursuant to Section 14.5; or (ii) in any other circumstance, provided that the number of Shares subject to Awards granted pursuant to this clause (ii), plus the number of Shares subject to Awards granted pursuant to clause (iii) of the first sentence of Section 5.5, clause (iii) of the first sentence of Section
7.2(b), and clause (ii) of the second sentence of Section 8.3, does not exceed five percent (5%) of the number of shares authorized for grant under this Plan.

 

 

 

- 9 -

 

 

ARTICLE 7—RESTRICTED STOCK AND STOCK UNITS

 

7.1         Grants of Restricted Stock and Stock Units. Restricted Stock Awards and Stock Unit Awards may be made to Eligible Participants as an incentive for the performance of future services
that the Committee in its sole discretion determines will contribute materially to the successful operation of the Employer. Subject to Section 4.2 with respect to grants to Outside Directors, Awards of Restricted Stock or Stock Units may be made either alone or in addition to or in tandem with other Awards granted under the Plan and may be current grants of Restricted Stock or Stock Units or deferred grants of Restricted Stock or Stock Units.

 

7.2         Restricted Stock/Stock Unit Award Agreement.

 

(a) In General. The Restricted Stock Award Agreement or the Stock Unit Award Agreement, as applicable, shall set forth the terms of the Award, as determined by the Committee, including, without limitation, the purchase price, if any,
to be paid for such Restricted Stock or Stock Unit, which may be more than, equal to, or less than Fair Market Value of a Share and may be zero, subject to such minimum consideration as may be required by applicable law; any restrictions applicable to the Restricted Stock or Stock Unit such as continued service or achievement of performance goals; the length of the Restriction Period and whether any circumstances will shorten or terminate the Restriction Period; and rights of the Participant during the Restriction
Period to vote and receive dividends in the case of Restricted Stock, or to receive dividend equivalents in the case of Stock Units that accrue dividend equivalents.

 

(b) Minimum Restriction Periods. All grants of Restricted Stock or Stock Units shall have a Restriction Period of at least three (3) years (or one (1) year in the case of Restricted Stock or Stock Unit Awards with restrictions based
solely on achievement of performance goals), except that the Committee may provide in the Award Agreement and/or an Individual Agreement for vesting of the Award on a pro rata basis during the Restriction Period and/or that the Restriction Period for any Award may otherwise be shortened only:  (i) in the event of the Participant’s death, Disability, or Retirement, in connection with a Change of Control, or pursuant to Section 14.5; (ii) for any Award granted on or before June 29, 2008, in the
event of the Participant’s Termination of Employment by the Company without Cause or by the Participant for Good Reason; or (iii) in any other circumstance, provided that the number of Shares subject to Awards granted pursuant to this clause (iii), plus the number of Shares subject to Awards granted pursuant to clause (iii) of the first sentence of Section 5.5, clause (ii) of the third sentence of Section 6.4, and clause (ii) of the second sentence of Section 8.3, does not exceed five percent (5%) of the
number of shares authorized for grant under this Plan.

 

(c) Execution of Award Agreements. Notwithstanding Section 3.5, a Restricted Stock or Stock Unit Award must be accepted within a period of sixty (60) days after receipt, or such other period as the Committee may specify, by executing
a Restricted Stock/Stock Unit Award Agreement and paying whatever price, if any, is required. The prospective recipient of a Restricted Stock or Stock Unit Award shall not have any rights with respect to such Award, unless and until such recipient has executed a Restricted Stock/Stock Unit Award Agreement and has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such Award.

 

7.3         Nontransferability. Except as otherwise provided in this Article 7 or in a Participant’s Award Agreement, no shares of Restricted Stock or Stock Units received by a Participant
shall be sold, exchanged, transferred, pledged, assigned, hypothecated or otherwise disposed of during the Restriction Period or, in the case of Stock Units, either during or after the Restriction Period, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, a Participant’s rights under an Award of Restricted Stock or Stock Units shall be exercisable during the Participant’s lifetime only by the Participant or
the Participant’s legal representative.

 

7.4         Certificates. Upon an Award of Restricted Stock to a Participant, Shares of Restricted Stock shall be registered in the Participant’s name. Certificates, if issued, may either
be held in custody by the Company until the Restriction Period expires or until restrictions thereon otherwise lapse and/or be issued to the Participant and 

 

 

 

- 10 -

 

 

registered in the name of the Participant, bearing an appropriate restrictive legend and remaining subject to appropriate stop-transfer orders. If required by the Committee, the Participant shall deliver to the Company one or more stock powers endorsed in blank relating to the Restricted Stock. If and when the Restriction Period expires without
a prior forfeiture of the Restricted Stock subject to such Restriction Period, unrestricted certificates for such shares shall be delivered to the Participant; provided, however, that the Committee may cause such legend or legends to be placed on any such certificates as it may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state law.

 

7.5         Dividends and Other Distributions. Except as provided in this Article 7 or in the Award Agreement, a Participant receiving a Restricted Stock Award shall have, with respect to
such Restricted Stock Award, all of the rights of a shareholder of the Company, including the right to vote the Shares to the extent, if any, such Shares possess voting rights and the right to receive any dividends; provided, however, the Committee may require that any dividends on such Shares of Restricted Stock shall be automatically deferred and reinvested in additional Restricted Stock subject to the same restrictions as the underlying Award, or may require that dividends and other distributions on Restricted
Stock shall be paid to the Company for the account of the Participant and held pending and subject to the vesting of the applicable Shares. The Committee shall determine whether interest shall be paid on such amounts, the rate of any such interest, and the other terms applicable to such amounts. A Participant receiving a Stock Unit Award shall not possess voting rights and shall accrue dividend equivalents on such Units to the extent provided in the Award Agreement relating to the Award. The Committee may require
that such dividend equivalents shall be subject to the same restrictions on vesting and payment as the underlying Award. In addition, with respect to Awards intended to qualify for the performance-based compensation provisions of Section 162(m) of the Code, the Committee may apply any restrictions it deems appropriate to the payment of dividends declared with respect to Restricted Stock such that the dividends and/or Restricted Stock maintain eligibility for such provisions.

 

ARTICLE 8—PERFORMANCE UNITS

 

8.1         Grant of Performance Units. Performance Units may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined
by the Committee.

 

8.2         Value of Performance Units. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance goals
in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units that will be paid out to the Participant. For purposes of this Article 8, the time period during which the performance goals must be met shall be called a “Performance Period.”

 

8.3         Earning of Performance Units. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units shall be entitled to receive
a payout of the number and value of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.  The Committee may provide in the Award Agreement and/or an Individual Agreement that the Performance Units are earned notwithstanding achievement of the performance goals only:  (i) in the event of the Participant’s death, Disability, or Retirement, in connection with
a Change of Control, or pursuant to Section 14.5; or (ii) in any other circumstance, provided that the number of Shares subject to Awards granted pursuant to this clause (ii), plus the number of Shares subject to Awards granted pursuant to clause (iii) of the first sentence of Section 5.5, clause (ii) of the third sentence of Section 6.4, and clause (iii) of the first sentence of Section 7.2(b), does not exceed five percent (5%) of the number of shares authorized for grant under this Plan.

 

8.4         Form and Timing of Payment of Performance Units. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units in the form of cash
or in Shares (or in a combination thereof) that has an aggregate Fair Market Value equal to the value of the earned Performance Units at the close 

 

 

 

- 11 -

 

 

of the applicable Performance Period. Such Shares may be granted subject to any restrictions in the Award Agreement deemed appropriate by the Committee. The determination of the Committee with respect to the form and timing of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award. Except as otherwise
provided in the Participant’s Award Agreement, a Participant shall be entitled to receive any dividends declared with respect to earned grants of Performance Units that are being settled in Shares and that have not yet been distributed to the Participant (such dividends may be subject to the same accrual, forfeiture, and payout restrictions as apply to dividends earned with respect to Stock Units, as set forth in Section 7.5 herein). In addition, unless otherwise provided in the Participant’s Award
Agreement, a Participant shall be entitled to exercise full voting rights with respect to such Shares.

 

8.5         Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Performance Units may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and distribution.

 

ARTICLE 9—PERFORMANCE MEASURES

 

9.1         Approved Measures. Until the Committee proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Article 9, the attainment
of which may determine the degree of payout and/or vesting with respect to Awards that are intended to qualify under the performance-based compensation provisions of Section 162(m) of the Code, the performance measure(s) to be used for purposes of such Awards shall be chosen from among the following: earnings, earnings per share, consolidated pre-tax earnings, net earnings, operating income, EBIT (earnings before interest and taxes), EBITDA (earnings before interest, taxes, depreciation and amortization), gross
margin, revenues, revenue growth, market value added, economic value added, return on equity, return on investment, return on assets, return on net assets, return on capital employed, total shareholder return, profit, economic profit, after-tax profit, pre-tax profit, cash flow measures, cash flow return, sales, sales volume, stock price, cost, and/or unit cost. The Committee can establish other performance measures for Awards granted to Eligible Participants that are not intended to qualify under the performance-based
compensation provisions of Section 162(m) of the Code.

 

9.2         Adjustments to Measures. The Committee shall be authorized to make adjustments in performance-based criteria or in the terms and conditions of other Awards in recognition of unusual
or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. In the case of Awards that are intended to qualify under the performance-based compensation provisions of Section 162(m) of the Code, such adjustments shall be made in accordance with guidelines established by the Committee at the time the performance-based Award is granted (or within such period thereafter as may be permissible under Section 162(m) of the Code). The Committee
shall also have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards which are designed to qualify for the performance-based compensation exception from the deductibility limitations of Section 162(m) of the Code, and which are held by executive officers, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward).

 

9.3         Use of Other Measures. If changes in applicable laws or regulations permit the Committee, in the case of Awards intended to qualify under the performance-based compensation provisions
of Section 162(m) of the Code, discretion to use performance measures other than those listed in Section 9.1 without obtaining shareholder approval of such changes, the Committee may make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the performance-based compensation exception from the deductibility limitations of Section 162(m) of the Code, the Committee may make such grants without
satisfying the requirements of Section 162(m) of the Code.

 

 

 

- 12 -

 

 

ARTICLE 10—AWARDS TO NON-EMPLOYEE DIRECTORS

 

An Outside Director may be granted one or more Awards of Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units or a combination thereof in any fiscal year, subject to the limitations of Section 4.2. The number of Shares subject to such Awards, any formula pursuant
to which such number shall be determined, the date of grant and the vesting, expiration and other terms applicable to such Awards shall be approved from time to time by the Committee and shall be subject to the terms of this Plan applicable to Awards in general. Outside Directors may receive Awards under the Plan only as provided in this Article 10.

 

ARTICLE 11—BENEFICIARY DESIGNATION

 

If and to the extent permitted by the Committee, each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives
any or all of such benefit. If any such designation is permitted, the Committee shall, in its sole discretion, establish rules and procedures for such designations. Unless different rules and procedures are established by the Committee, each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with a designated representative of the Committee during the Participant’s
lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

 

ARTICLE 12—DEFERRALS

 

The Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to Stock Units. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such deferrals, and the Committee may provide for such arrangements, including conversion to another form of Award that is available under the Plan and has equivalent value, as it deems necessary in order to permit the deferral of taxes in connection with such deferral by the Participant.

 

ARTICLE 13—WITHHOLDING

 

13.1         Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal,
state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. The Company shall not be required to issue Shares or to recognize the disposition of such Shares until such obligations are satisfied.

 

13.2         Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event
arising as a result of Awards granted hereunder, to the extent permitted or required by the Committee, these obligations may or shall be satisfied by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to not more than the minimum amount of tax required to be withheld with respect to the transaction. All such elections shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

ARTICLE 14—AMENDMENT AND TERMINATION

 

14.1         Amendment of Plan. Except as otherwise provided in this Section 14.1, the Committee or the Board may at any time terminate or from time to time amend the Plan in whole or in part,
but no such action shall 

 

 

 

- 13 -

 

 

adversely affect any rights or obligations with respect to any Awards previously granted under the Plan, unless the affected Participants consent in writing. Neither the Committee nor the Board may, without approval of the shareholders of the Company, amend the Plan to (i) materially increase benefits accruing to Participants under the Plan,
(ii) materially increase the number of Shares which may be issued under the Plan or (iii) materially modify the requirements for participation in the Plan. The Company will also obtain the approval of the shareholders before amending the Plan to the extent required by Section 162(m) or Section 422 of the Code or the rules of any securities exchange or quotation or trading system on which Shares are traded or other applicable law.

 

14.2         Amendment of Award; Repricing. The Committee may, at any time, amend outstanding Awards in a manner not inconsistent with the terms of the Plan; provided, however, that: (i) if
such amendment is adverse to the Participant, as determined by the Committee, the amendment shall not be effective unless and until the Participant consents, in writing, to such amendment, except as provided in Section 14.4 or in the Award Agreement; and (ii) the Committee shall not have the authority to decrease the exercise price of any outstanding Option or SAR, nor award any Option or SAR in replacement of a canceled Option or SAR with a higher exercise price, except in accordance with Section 4.3 or unless
such an amendment is approved by the shareholders of the Company. To the extent not inconsistent with the terms of the Plan and the foregoing, the Committee may, at any time, amend an outstanding Award Agreement in a manner that is not unfavorable to the Participant without the consent of such Participant.  Neither the Committee nor the Board may amend, waive, lapse or otherwise modify any conditions or restrictions in any outstanding Award without approval of the shareholders of the Company, except
to the extent the Awards so modified would have been permitted by clause (iii) of the first sentence of Section 5.5, clause (ii) of the third sentence of Section 6.4, clause (iii) of the first sentence of Section 7.2(b), or clause (ii) of the second sentence of Section 8.3.

 

14.3         Termination of Plan. No Awards shall be granted under the Plan after November 3, 2015, but Awards theretofore granted may extend beyond that date.

 

14.4         Cancellation of Awards.

 

(a) The Committee may, in its sole discretion, provide in the Award Agreement that if a Participant engages in any “Detrimental Activity” (as defined below), the Committee may, notwithstanding any other provision in this Plan to the contrary, cancel, rescind, suspend, withhold
or otherwise restrict or limit any unexpired, unexercised, unpaid or deferred Award as of the first date the Participant engages in the Detrimental Activity, unless sooner terminated by operation of another term of this Plan or any other agreement. Without limiting the generality of the foregoing, the Award Agreement may also provide that if the Participant exercises an Option or SAR, receives a Performance Unit payout, receives or vests in Shares under an Award or vests in or receives a payout under a Stock
Unit at any time during the period beginning six months prior to the date the Participant first engages in Detrimental Activity and ending six months after the date the Participant ceases to engage in any Detrimental Activity, the Participant shall be required to pay to the Company the excess of the then fair market value of the Shares subject to the Award over the total price paid by the Participant for such Shares.

 

(b) For purposes of this Section, except to the extent provided otherwise in the Award Agreement, “Detrimental Activity” means any of the following, as determined by the Committee in good faith: (i) the violation of any agreement between the Company or any Employer and the Participant
relating to the disclosure of confidential information or trade secrets, the solicitation of employees, customers, suppliers, licensees, licensors or contractors, or the performance of competitive services; (ii) conduct that constitutes Cause (as defined in Section 2.4 above without regard to any definition of Cause in any Individual Agreement), whether or not the Participant’s employment is terminated for Cause; (iii) making, or causing or attempting to cause any other person to make, any statement, either
written or oral, or conveying any information about the Company or any other Employer which is disparaging or which in any way reflects negatively upon the Company or the Employer; (iv) improperly disclosing or otherwise misusing any confidential information regarding the Company or any Employer; or (v) the refusal or failure of a 

 

 

 

- 14 -

 

 

Participant to provide, upon the request of the Company, a certification, in a form satisfactory to the Company, that he or she has not engaged in any activity described in clauses (i)-(iv).

 

14.5         Assumption or Acceleration of Awards. In the event of a proposed sale of all or substantially all of the assets or stock of the Company, the merger of the Company with or into
another corporation such that shareholders of the Company immediately prior to the merger exchange their shares of stock in the Company for cash and/or shares of another entity or any other corporate transaction to which the Committee deems this provision applicable, each Award shall be assumed or an equivalent Award shall be substituted by the successor corporation or a parent or subsidiary of such successor corporation (and adjusted as appropriate), unless such successor corporation does not agree to assume
the Award or to substitute an equivalent award, in which case the Committee may, in lieu of such assumption or substitution, provide for the Participant to have the right to exercise the Option or other Award as to all Shares, including Shares as to which the Option or other Award would not otherwise be exercisable (or with respect to Restricted Stock or Stock Units, provide that all restrictions shall lapse). If the Committee makes an Option or other Award fully exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets or stock or other corporate transaction, the Committee shall notify the Participant that, subject to rescission if the merger, sale of assets or stock or other corporate transaction is not successfully completed within a certain period, the Option or other Award shall be fully exercisable for a period of fifteen (15) days from the date of such notice (or such other period as provided by the Committee), and, to the extent not exercised, the Option or other Award will
terminate upon the expiration of such period.

 

ARTICLE 15—MISCELLANEOUS PROVISIONS

 

15.1         Restrictions on Shares. All certificates for Shares delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable
under the rules and regulations of the Securities and Exchange Commission, any securities exchange or quotation or trading system on which Shares are traded and any applicable federal, state, local or foreign laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. In making such determination, the Committee may rely upon an opinion of counsel for the Company. 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 the 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 quotation or trading system on which Shares are traded.

 

15.2         Rights of a Shareholder. Except as otherwise provided in Article 7 of the Plan and in the Restricted Stock Award Agreement, each Participant who receives an Award of Restricted
Stock shall have all of the rights of a shareholder with respect to such Shares, including the right to vote the Shares to the extent, if any, such Shares possess voting rights and receive dividends and other distributions. Except as provided otherwise in the Plan or in an Award Agreement, no Participant shall have any rights as a shareholder with respect to any Shares covered by an Award prior to the date of issuance to him or her of a certificate or certificates for such Shares.

 

15.3         No Implied Rights. Nothing in the Plan or any Award granted under the Plan shall confer upon any Participant any right to continue in the service of the Employer, or to serve
as a member of the Board, or interfere in any way with the right of the Employer to terminate his or her employment or other service relationship at any time. Except to the extent approved by the Board, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan, severance program, or other arrangement of the Employer for the benefit of its employees. No Participant shall have any claim to an Award until it is actually granted under
the Plan. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Committee, be no greater than the right of an unsecured general creditor of the Company.

 

15.4         Compliance with Laws. At all times when the Committee determines that compliance with Section 162(m) of the Code is required or desirable, all Awards granted under this Plan shall
comply with the 

 

 

 

- 15 -

 

 

requirements of Section 162(m) of the Code. In addition, in the event that changes are made to Section 162(m) of the Code to permit greater flexibility with respect to any Awards under the Plan, the Committee may, subject to the requirements of Article 14, make any adjustments it deems appropriate. The Plan and the grant of Awards shall be
subject to all applicable federal, state local and foreign laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required.

 

15.5         Successors. The terms of the Plan shall be binding upon the Company, and its successors and assigns.

 

15.6         Tax Elections. Each Participant shall give the Committee prompt written notice of any election made by such Participant under Section 83(b) of the Code or any similar provision
thereof. Notwithstanding the preceding sentence, the Committee may condition any award on the Participant’s not making an election under Section 83(b) of the Code.

 

15.7         Legal Construction.

 

(a) Severability. If any provision of this Plan or an Award Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would result in the Plan or any Award Agreement not complying with any law deemed
applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Agreement, it shall be stricken and the remainder of the Plan or the Award Agreement shall remain in full force and effect.

 

(b) Gender and Number. Where the context permits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular.

 

(c) Governing Law. To the extent not preempted by federal law, the Plan and all Award Agreements hereunder, shall be construed in accordance with and governed by the substantive laws of the State of North Carolina.

  

- 16 -Exhibit 10.1 to Form 8-K dated October 29, 2009

Exhibit 10.1

SUBSCRIPTION AGREEMENT

Northern Oil
and Gas, Inc. 

315
Manitoba Avenue, Suite 200

Wayzata,
MN 55391

Gentlemen:

          The
undersigned (the “Investor”)
hereby confirms its agreement with Northern Oil and Gas, Inc., a Nevada
corporation (the “Company”),
as follows: 

          1.     This
Subscription Agreement, including the Terms and Conditions for Purchase of
Shares attached hereto as Annex I (collectively, this “Agreement”), is
made as of the date set forth below between the Company and the Investor. 

          2.     The
Company represents and warrants that it has authorized the sale and issuance to
certain investors of up to an aggregate of Nine Million Five Hundred Thousand (9,500,000)
shares (the “Shares”)
of its Common Stock, par value $0.001 per share (the “Common Stock”),
subject to adjustment by the Company’s Board of Directors or a committee
thereof, for a purchase price of $9.12 per share (the “Purchase Price”). 

          3.     The
Company represents and warrants that the offering and sale of the Shares (the “Offering”) are
being made pursuant to (a) an effective Registration Statement on Form S-3
(Registration No. 333-158320) (the “Registration Statement”) filed by the
Company with the Securities and Exchange Commission (the “Commission”),
including the Prospectus contained therein (the “Base Prospectus”), (b) if
applicable, certain “free writing prospectuses” (as that term is defined in
Rule 405 under the Securities Act of 1933, as amended (the “Act”)), that have been or will be filed
with the Commission and delivered to the Investor on or prior to the date
hereof (the “Issuer Free Writing Prospectus”),
containing certain supplemental information regarding the Shares, the terms of
the Offering and the Company, and (c) a Prospectus Supplement (the “Prospectus Supplement”
and, together with the Base Prospectus, the “Prospectus”) containing certain
supplemental information regarding the Shares and terms of the Offering that
has been or will be (i) filed with the Commission, and (ii) delivered to the
Investor (or made available to the Investor by the filing by the Company of an
electronic version thereof with the Commission). 

          4.     The
Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor the Shares of Common Stock
set forth below for the aggregate purchase price set forth below. The Shares
shall be purchased pursuant to the Terms and Conditions for Purchase of Shares
attached hereto as Annex I and incorporated herein by this reference as
if fully set forth herein. The Investor acknowledges that the Offering is not
being underwritten by the placement agents (the “Placement Agents”) named in the
Prospectus Supplement and that there is no minimum offering amount. 

          5.     The
manner of settlement of the Shares purchased by the Investor shall be
determined by such Investor as follows (check one): 

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 [____] A.

 	
 Delivery by crediting the account of the Investor’s prime broker (as
specified by such Investor on Exhibit A annexed hereto) with the
Depository Trust Company (“DTC”)
through its Deposit/Withdrawal At Custodian (“DWAC”) system, whereby Investor’s prime broker
shall
initiate a DWAC transaction on the Closing Date using its DTC participant
identification number, and released by Registrar and Transfer Company, the
Company’s transfer agent (the “Transfer
Agent”), at the Company’s direction. NO LATER THAN ONE (1)
BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE
COMPANY, THE INVESTOR SHALL: 

 
	
  

 	
  

 
	
  

 	
  

 	
  (I)

 	
 DIRECT THE BROKER-DEALER AT WHICH THE
 ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SHARES ARE MAINTAINED TO SET UP A
 DWAC INSTRUCTING THE TRANSFER
 AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES, AND

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  (II)

 	
 REMIT BY WIRE TRANSFER THE AMOUNT OF FUNDS
 EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE SHARES BEING PURCHASED BY THE
 INVESTOR TO THE FOLLOWING ACCOUNT:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Bank Name:
 Citibank, New York

 ABA # 021000089

 Account Name: Northern Oil and Gas, Inc.

 Account Number: 40611172

 F/C Account: 364-040573

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 – OR – 

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 [____] B.

 	
 Delivery versus payment (“DVP”) through DTC (i.e., on the
 Closing Date, the Company shall deliver Shares registered in the Investor’s
 name and address as set forth below and released by the Transfer Agent to the
 Investor through DTC at the Closing directly to the account(s) at Canaccord
 Adams Inc. (“Canaccord”)
 identified by the Investor; upon receipt of such Shares, Canaccord shall
 promptly electronically deliver such Shares to the Investor, and
 simultaneously therewith payment shall be made by Canaccord by wire transfer
 to the Company). NO LATER THAN ONE (1)
 BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE
 COMPANY, THE INVESTOR SHALL:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  (I)

 	
 NOTIFY CANACCORD OF THE ACCOUNT OR ACCOUNTS
 AT CANACCORD TO BE CREDITED WITH THE SHARES BEING PURCHASED BY SUCH INVESTOR,
 AND

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  (II)

 	
 CONFIRM THAT THE ACCOUNT OR ACCOUNTS AT
 CANACCORD TO BE CREDITED WITH THE SHARES BEING PURCHASED BY THE INVESTOR HAVE
 A MINIMUM BALANCE EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE SHARES BEING
 PURCHASED BY THE INVESTOR.

 

 - 2 -

IT IS THE INVESTOR’S RESPONSIBILITY TO (A)
MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE PROPER ACCOUNT BALANCE IN A
TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC OR DVP IN A TIMELY
MANNER. IF THE INVESTOR DOES NOT DELIVER THE AGGREGATE PURCHASE PRICE FOR THE
SHARES OR DOES NOT MAKE PROPER ARRANGEMENTS FOR SETTLEMENT IN A TIMELY MANNER,
THE SHARES MAY NOT BE DELIVERED AT CLOSING TO THE INVESTOR OR THE INVESTOR MAY
BE EXCLUDED FROM THE CLOSING ALTOGETHER.

          6.     The
Investor represents that, except as set forth below, (a) it has had no material
relationship (exclusive of any investments by the Investor in the Company’s securities)
within the past three years with the Company or persons known to it to be
affiliates of the Company, (b) it is not a FINRA member or an Associated Person
of a FINRA member (as such term is defined under the NASD Membership and
Registration Rules Section 1011) as of the Closing, and (c) neither the
Investor nor any group of Investors (as identified in a public filing made with
the Commission) of which the Investor is a part in connection with the Offering
of the Shares, acquired, or obtained the right to acquire, 20% or more of the
Common Stock (or securities convertible into or exercisable for Common Stock)
or the voting power of the Company on a post-transaction basis. Exceptions: 

	
  

 	
  

 
	
 The representations above are made to the knowledge of the signatory
 below.

 	
  

 
	
 (If no exceptions, write “none.” If left blank, response will be
 deemed to be “none.”)

 	
  

 

          7.     The
Investor represents that it has received (or otherwise had made available to it
by the filing by the Company of an electronic version thereof with the
Commission) the Base Prospectus which is a part of the Company’s Registration
Statement, the documents incorporated by reference therein and any Issuer Free
Writing Prospectus (collectively, the “Disclosure Package”), prior to or in
connection with the receipt of this Agreement. The Investor acknowledges that,
prior to the delivery of this Agreement by the Investor to the Company, the
Investor will receive certain additional information regarding the Offering,
including pricing information (the “Offering Information”). Such information
may be provided to the Investor by any means permitted under the Act, including
the Prospectus Supplement, a free writing prospectus and oral communications. 

          8.     No
offer by the Investor to buy Shares will be accepted and no part of the
Purchase Price will be delivered to the Company until the Investor has received
the Offering Information and the Company has accepted such offer by
countersigning a copy of this Agreement, and any such offer may be withdrawn or
revoked, without obligation or commitment of any kind, at any time prior to the
Company (or Placement Agents on behalf of the Company) sending (orally, in
writing or by electronic mail) notice of its acceptance of such offer. An
indication of interest will involve no obligation or commitment of any kind
until the Investor has been delivered the Offering Information and this
Agreement is accepted and countersigned by or on behalf of the Company. 

[Remainder of Page Left Blank Intentionally. Signature
Page Follows.]

 - 3 -

	
  

 	
  

 	
  

 	
  

 
	
 Number of
 Shares:

 	
  

 	
  

 	
  

 
	
 Purchase
 Price Per Share: $

 	
  

 	
  

 
	
 Aggregate
 Purchase Price: $ 

 	
  

 	
  

 

          Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Dated as of: ______________ __, 2009

 
	
  

 
	
  

 	
 INVESTOR

 	
  

 
	
  

 	
 By:

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Print Name:

 	
  

 
	
  

 	
 Title:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Address:

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 E-mail:

 	
  

 
	
  

 	
 Phone:

 	
  

 	
  

 	
  

 

Agreed and
Accepted

this ___ day of ______________, 2009:

	
  

 	
  

 	
  

 
	
 NORTHERN OIL AND GAS, INC. 

 
	
  

 
	
 By:

 	
  

 	
  

 
	
 Name:

 	
  

 
	
 Title: 

 	
  

 

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES

           1.     Authorization
and Sale of the Shares. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of the
Shares.

           2.     Agreement
to Sell and Purchase the Shares; Placement Agents.

                    2.1     At
the Closing (as defined in Section 3.1), the Company will sell to the
Investor, and the Investor will purchase from the Company, upon the terms and
conditions set forth herein, the number of Shares set forth on the last page of
the Agreement to which these Terms and Conditions for Purchase of Shares are
attached as Annex I (the “Signature Page”) for the aggregate purchase price therefor
set forth on the Signature Page.

                  
  2.2     The Company
proposes to enter into substantially this same form of Subscription Agreement
with certain other investors (the “Other Investors”) and expects to complete sales of Shares to
them. The Investor and the Other Investors, if any, are hereinafter sometimes
collectively referred to as the “Investors,” and this Agreement and the Subscription
Agreements executed by the Other Investors are hereinafter sometimes
collectively referred to as the “Agreements.” 

                    2.3     Investor
acknowledges that the Company has agreed to pay Canaccord Adams Inc.
(“Canaccord”) and FIG Partners, LLC (each individually, a “Placement Agent” and
collectively, the “Placement Agents”)
a fee (the “Placement Fee”) in
respect of the sale of Shares to the Investor.  

          
          2.4     The
Company has entered into a Placement Agency Agreement, dated October 29, 2009
(the “Placement Agreement”), with the Placement Agents that contains certain
representations, warranties, covenants and agreements of the Company that may
be relied upon by the Investor, which shall be a third party beneficiary
thereof. The Company represents and warrants that a true and correct copy of
the Placement Agreement is attached hereto as Exhibit B. Except with
respect to the material terms and conditions of the transactions contemplated
by this Agreement, the Placement Agreement and any other documents or
agreements contemplated hereby or thereby, the Company confirms that neither it
nor any other person acting on its behalf has provided the Investor or any
Other Investor or its respective agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information. The Company understands and confirms that the Investor will rely
on the foregoing representations in effecting transactions in securities of the
Company. 

          3.     Closings
and Delivery of the Shares and Funds. 

                    3.1     Closing.
The completion of the purchase
and sale of the Shares (the “Closing”) shall occur at a place and time (the “Closing
Date”)
to be specified by the Company and the Placement Agents (such Closing Date to
be the third business day following the date of this signed Agreement), and of
which the Investors will be notified in advance by the Placement Agents, in
accordance with Rule 15c6-1 promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). At the Closing, (a) the Company shall cause
the Transfer Agent to deliver to the Investor the number of Shares set forth on
the Signature Page registered in the name of the Investor or, if so indicated
on the Investor Questionnaire attached hereto as Exhibit A, in the name
of a nominee 

designated by the Investor and (b) the aggregate purchase price for the
Shares being purchased by the Investor will be delivered by or on behalf of the
Investor to the Company. 

                    3.2     Conditions
to the Obligations of the Parties. 

                              (a)
Conditions to the Company’s Obligations.
The Company’s obligation to issue and sell the Shares to the Investor shall be
subject to: (i) the delivery by the Investor, in accordance with the provisions
of this Agreement, of the purchase price for the Shares being purchased
hereunder as set forth on the Signature Page and (ii) the accuracy of the
representations and warranties made by the Investor in this Agreement and the
fulfillment of those undertakings of the Investor in this Agreement to be
fulfilled prior to the Closing Date.

                              (b)
Conditions to the Investor’s Obligations.
The Investor’s obligation to purchase the Shares will be subject to (i) the
delivery by the Company of the Shares in accordance with the provisions of this
Agreement, (ii) the accuracy of the representations and warranties made by the
Company and the fulfillment of those undertakings of the Company to be
fulfilled prior to the Closing Date, including without limitation, those
contained in the Placement Agreement, (iii) the satisfaction of the conditions
to the closing set forth in the Placement Agreement, and to the condition that
Canaccord, as lead placement agent, shall not have: (x) terminated the
Placement Agreement pursuant to the terms thereof or (y) determined that the
conditions to the closing in the Placement Agreement have not been satisfied.
The Investor’s obligations are expressly not conditioned on the purchase by any
or all of the Other Investors of the Shares that they have agreed to purchase
from the Company. The Investor understands and agrees that, in the event that
Canaccord, as lead placement agent, in its sole discretion determines that the
conditions to closing in the Placement Agreement have not been satisfied or if
the Placement Agreement may be terminated for any other reason permitted by the
Placement Agreement, then Canaccord, as lead placement agent, may, but shall
not be obligated to, terminate such Agreement, which shall have the effect of
terminating this Subscription Agreement pursuant to Section 14 below.

                    3.3     Delivery
of Funds. 

                              (a)     DWAC
Delivery. If the Investor elects to settle the Shares purchased by such
Investor through DTC’s Deposit/Withdrawal at Custodian (“DWAC”) delivery system, no
later than one (1) business day after the execution
of this Agreement by the Investor and the Company, the Investor
shall remit by wire transfer the amount of funds equal to the aggregate
purchase price for the Shares being purchased by the Investor to the following
account designated by the Company:

	
  

 	
  

 
	
  

 	
 Bank Name:
 Citibank, New York

 
	
  

 	
 ABA #
 021000089

 
	
  

 	
 Account
 Name: Northern Oil and Gas, Inc.

 
	
  

 	
 Account
 Number: 40611172

 
	
  

 	
 F/C Account:
 364-040573

 

                              Such
funds shall be held in escrow by the Company until the Closing upon the
satisfaction of the conditions set forth in Section 3.2(b) hereof. 

                              (b)     Delivery
Versus Payment through The Depository Trust Company. If the Investor elects
to settle the Shares purchased by such Investor by delivery versus payment
through 

 - 2 -

DTC, no later than one (1)
business day after the execution of this Agreement by the Investor and the
Company, the Investor shall confirm that the account or accounts
at Canaccord to be credited with the Shares being purchased by the Investor
have a minimum balance equal to the aggregate purchase price for the Shares
being purchased by the Investor. 

                    3.4     Delivery
of Shares. 

                              (a)     DWAC
Delivery. If the Investor elects to settle the Shares purchased by such
Investor through DTC’s DWAC delivery system, no later than one (1) business day after the execution of
this Agreement
by the Investor and the Company, the Investor shall direct the
broker-dealer at which the account or accounts to be credited with the Shares
being purchased by such Investor are maintained, which broker/dealer shall be a
DTC participant, to set up a DWAC instructing Registrar and Transfer Company,
the Company’s Transfer Agent, to credit such account or accounts with the
Shares. Such DWAC instruction shall indicate the settlement date for the
deposit of the Shares, which date shall be provided to the Investor by
Canaccord. At the Closing, the Company shall direct the Transfer Agent to
credit the Investor’s account or accounts with the Shares pursuant to the
information contained in the DWAC. 

                              (b)     Delivery
Versus Payment through The Depository Trust Company. If the Investor elects
to settle the Shares purchased by such Investor by delivery versus payment
through DTC, no later than one (1)
business day after the execution of this Agreement by the Investor and the
Company, the Investor shall notify Canaccord of the account or
accounts at Canaccord to be credited with the Shares being purchased by such
Investor. On the Closing Date, the Company shall deliver the Shares to the
Investor through DTC directly to the account(s) at Canaccord identified by
Investor and simultaneously therewith payment shall be made by Canaccord by
wire transfer to the Company. 

          4.
     Representations, Warranties and Covenants of the
Investor.

          The
Investor acknowledges, represents and warrants (as of the date hereof) to, and
agrees with, the Company and the Placement Agents that:

                    4.1     The
Investor (a) is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in shares presenting
an investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the Company and investments in comparable
companies, (b) has answered all questions on the Signature Page and the
Investor Questionnaire and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date and (c) in
connection with its decision to purchase the number of Shares set forth on the
Signature Page, has received and is relying only upon the Disclosure Package
and the documents incorporated by reference therein and the Offering
Information and the representations, warranties, covenants and agreements of
the Company contained in the Placement Agreement. 

 - 3 -

                    4.2     (a)
No action has been or will be taken in any jurisdiction outside the United States
by the Company or the Placement Agents that would permit an offering of the
Shares, or possession or distribution of offering materials in connection with
the issue of the Shares in any jurisdiction outside the United States where
action for that purpose is required, (b) if the Investor is outside the United
States, it will comply with all applicable laws and regulations in each foreign
jurisdiction in which it purchases, offers, sells or delivers Shares or has in
its possession or distributes any offering material, in all cases at its own
expense and (c) none of the Placement Agents is authorized to make or has made
any representation, disclosure or use of any information in connection with the
issue, placement, purchase and sale of the Shares, except as set forth or
incorporated by reference in the Base Prospectus, any Issuer Free Writing
Prospectus or the Prospectus Supplement. 

                    4.3     (a)
The Investor is either an individual or an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has full right, power, authority and capacity to enter into
this Agreement and to consummate the transactions contemplated hereby and has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement, and (b) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
to the enforceability of any rights to indemnification or contribution that may
be violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation). The
Investor’s execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated hereby do not and will not
(i) conflict with or violate any provision of the Investor’s certificate or articles
of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Investor is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Investor is bound or affected. 

                    4.4     The
Investor understands that nothing in this Agreement, the Prospectus or any
other materials presented to the Investor in connection with the purchase and
sale of the Shares constitutes legal, tax or investment advice. The Investor
has consulted such legal, tax and investment advisors and made such
investigation as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Shares. 

                    4.5     Since
the time at which a Placement Agent first contacted the Investor about the
Offering, the Investor has not disclosed any information regarding the Offering
to any third parties (other than its legal, accounting and other advisors) and
has not engaged in any transactions involving the securities of the Company
(including, without limitation, any Short Sales involving the Company’s
securities). The Investor covenants that it will (i) maintain the
confidentiality of all information acquired as a result of the transactions
contemplated herein and (ii) not engage in any purchases or sales of the
securities of the Company (including Short Sales), in each case prior to the
time that the transactions contemplated by this Agreement are publicly
disclosed. The Investor agrees that it will not use any of the Shares acquired
pursuant to this Agreement to cover any short position in the Common Stock if
doing so would be in violation of applicable securities laws. For purposes
hereof, “Short Sales” include, without limitation, all “short sales” as defined
in Rule 200 promulgated under  

 - 4 -

Regulation SHO under the Exchange Act, whether or not against the box,
and all types of direct and indirect stock pledges, forward sales contracts,
options, puts, calls, short sales, swaps, “put equivalent positions” (as
defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements
(including on a total return basis), and sales and other transactions through
non-US broker dealers or foreign regulated brokers.

          5.     Survival
of Representations, Warranties and Agreements; Third Party Beneficiary.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agents, all covenants, agreements, representations and warranties
made by the Company and the Investor herein and, with respect to the Company,
in the Placement Agreement, will survive the execution of this Agreement, the
delivery to the Investor of the Shares being purchased and the payment
therefor. 

          6.     Notices.
All notices, requests, consents
and other communications hereunder will be in writing, will be mailed (a) if
within the domestic United States by first-class registered or certified
airmail, or nationally recognized overnight express courier, postage prepaid,
or by facsimile or (b) if delivered from outside the United States, by
International Federal Express or facsimile, and (c) will be deemed given (i) if
delivered by first-class registered or certified mail domestic, three business
days after so mailed, (ii) if delivered by nationally recognized overnight
carrier, one business day after so mailed, (iii) if delivered by International Federal
Express, two business days after so mailed and (iv) if delivered by facsimile,
upon electric confirmation of receipt and will be delivered and addressed as
follows:

	
  

 	
  

 	
  

 
	
  

 	
  (a)

 	
 if to the
 Company, to: 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Northern Oil
 and Gas, Inc. 

 
	
  

 	
  

 	
 315 Manitoba
 Avenue, Suite 200

 
	
  

 	
  

 	
 Wayzata, MN
 55391

 
	
  

 	
  

 	
 Attention:
 General Counsel

 
	
  

 	
  

 	
 Facsimile
 No.: (952) 476-9801

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 with copies
 to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Faegre &
 Benson LLP 

 
	
  

 	
  

 	
 2200 Wells
 Fargo Center

 
	
  

 	
  

 	
 Minneapolis,
 MN 55402-3901

 
	
  

 	
  

 	
 Attention:
 W. Morgan Burns

 
	
  

 	
  

 	
 Facsimile
 No.: (612) 766-1600

 

	
  

 	
  

 
	
  

 	
           (b)     if
 to the Investor, at its address on the Signature Page hereto, or at such
 other address or addresses as may have been furnished to the Company in
 writing.

 

          7.     Changes.
This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investor.
Any modification or amendment to Section 2 (Representations and Warranties of
the Company), Section 5 (Conditions of Placement Agents’ Obligations), Section
6(f) (Representations and Agreements to Survive Delivery), or Section 10
(Persons Entitled to Benefit of Agreement) of the Placement Agreement, and any
modification or amendment to the Placement Agreement that is material and
adverse to the Investor, shall require the prior written consent of the
Investor. 

 - 5 -

          8.     Headings.
The headings of the various sections of this Agreement have been inserted for
convenience of reference only and will not be deemed to be part of this
Agreement.

          9.     Severability. In case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein will not in any way be affected or
impaired thereby. 

          10.    Governing
Law.
This Agreement will be governed by, and construed in accordance with, the
internal laws of the State of New York, without giving effect to the principles
of conflicts of law that would require the application of the laws of any other
jurisdiction. Except as set forth below, no proceeding may be commenced,
prosecuted or continued in any court other than the courts of State of New York
located in the City and County of New York or the United States District Court for
the Southern District of New York, which courts shall have jurisdiction over
the adjudication of such matters, and the parties hereby consent to the
jurisdiction of such courts and personal service with respect thereto. All
parties hereby waive all right to trial by jury in any proceeding (whether
based upon contract, tort or otherwise) in any way arising out of or relating
to this Agreement. All parties agree that a final judgment in any such
proceeding brought in any such court shall be conclusive and binding upon each
party and may be enforced in any other courts in the jurisdiction of which a
party is or may be subject, by suit upon such judgment.

          11.    Counterparts.
This Agreement may be executed in two or more counterparts, each of which will
constitute an original, but all of which, when taken together, will constitute
but one instrument, and will become effective when one or more counterparts
have been signed by each party hereto and delivered to the other parties.
Delivery of an executed counterpart by facsimile or portable document format
(.pdf) shall be effective as delivery of a manually executed counterpart
thereof.

          12.    Confirmation
of Sale.
The Investor acknowledges and agrees that such Investor’s receipt of the Company’s
signed counterpart to this Agreement, together with the Prospectus Supplement
(or the filing by the Company of an electronic version thereof with the
Commission), shall constitute written confirmation of the Company’s sale of
Shares to such Investor.

          13.    Press
Release.
The Company and the Investor agree that, prior to the opening of the New York
Stock Exchange Amex Equities market in New York City on the business day
immediately after the date hereof, the Company shall (i) issue a press release
announcing the Offering and disclosing all material information regarding the
Offering and (ii) file a Current Report on Form 8-K with the Commission
disclosing all material information regarding the Offering and including the
Placement Agreement and a form of this Agreement as exhibits thereto. From and
after the issuance of such press release and the filing of such Current Report
on Form 8-K, the Company shall have publicly disclosed all material, non-public
information delivered to any of the Investors by the Company or any person
acting on its behalf, including, without limitation, the Placement Agent, in
connection with the transactions contemplated by this Agreement, the Placement
Agreement and any other documents or agreements contemplated hereby or thereby.
The Company shall not identify the name of any Investor or any affiliate of any
investment adviser of such Investor in any press release or public filing, or
otherwise publicly disclose the name of any Investor or any affiliate of
investment adviser of such Investor, without such Investor’s prior written
consent, unless required by law or the rules and regulations of a national
securities exchange, provided, however, that promptly after becoming aware of
any request or requirement to so disclose (a “Disclosure Requirement”), and in
any event prior to any such disclosure, the Company will provide such Investor
with notice of such request or requirement so that such Investor may at its
election seek a protective order or other appropriate  

 - 6 -

remedy and the Company will fully cooperate with such Investor’s
efforts to obtain the same; provided, further, however, if, absent the entry of
such a protective order or other remedy, the Company is compelled by applicable
law, rule or regulation or a court order, subpoena, similar judicial process,
regulatory agency or stock exchange rule to disclose such Investor’s name, the
Company may disclose only that portion of such information that the Company is
so compelled to disclose and will use its reasonable efforts to obtain
assurance that confidential treatment will be accorded to that portion of such
information that is being disclosed. As of the date hereof, the Company is not
aware of any Disclosure Requirement.

          14.    Termination.
In the event that the Placement Agreement is terminated by the Placement Agents
pursuant to the terms thereof, this Agreement shall terminate without any
further action on the part of the parties hereto.

          15.    Fees and
Expenses.
Each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.

 - 7 -

EXHIBIT A

NORTHERN OIL AND GAS, INC.

INVESTOR
QUESTIONNAIRE

          Pursuant to
Section 3 of Annex I to the Agreement, please provide us with the
following information:

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 1.

 	
 The exact name that your Shares are to be registered in. You may use
 a nominee name if appropriate:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.

 	
 The relationship between the Investor and the registered holder
 listed in response to item 1 above:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.

 	
 The mailing address of the registered holder listed in response to
 item 1 above:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.

 	
 The Social Security Number or Tax Identification Number of the
 registered holder listed in the response to item 1 above:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 5.

 	
 Name of DTC Participant (broker-dealer at which the account or
 accounts to be credited with the Shares are maintained):

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 6.

 	
 DTC Participant Number:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.

 	
 Name of Account at DTC Participant being credited with the Shares:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.

 	
 Account Number at DTC Participant being credited with the Shares:

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 9.

 	
 EIN Number:

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