Document:

.

	Loan No.  4020712

	Page #

Exhibit 10.11

COMMERCIAL GUARANTY

	Principal

	Loan Date

	Maturity

	Loan No

	Call/Coll

340

	Account

	Officer GMW

	INITIALS

	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.

	 
	Borrower:

	STERION INCORPORATED  (TIN:  41-1391803)

13828 LINCOLN ST NE

HAM LAKE, MN  55304

	Lender:

	Citizens Independent Bank

Hopkins Location

10901 Excelsior Boulevard

Hopkins, MN  55343

(952) 935-3333

	Guarantor:

	[KENNETH W BRIMMER

11505 W LAKEVIEW LANE

MINNETONKA, MN  55305]

[GARY COPPERUD

1234 TRAPPERS PT

FORT COLLIN, CO 80524]

	 	 

AMOUNT OF GUARANTY.  The amount of this Guaranty is Unlimited.

CONTINUING UNLIMITED GUARANTY.  For good and valuable consideration, [KENNETH W BRIMMER] [GARY COPPERUD] (“Guarantor”) absolutely and unconditionally guarantees and promises to pay to Citizens Independent Bank (“Lender”) or its order, in legal tender of the United States of America, the indebtedness (as that term is defined below) of STERION INCORPORATED (“Borrower”) to Lender on the terms and conditions set forth in this Guaranty.  Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing.

INDEBTEDNESS GUARANTEED.  The Indebtedness guaranteed by this Guaranty includes any and all of Borrower’s indebtedness to Lender and is used in the most comprehensive sense and means and includes any and all of Borrower’s liabilities, obligations and debts to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whether any such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise.

DURATION OF GUARANTY.  This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full.  If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing.  Guarantor’s written notice of Written revocation of this Guaranty will apply only to advances or new Indebtedness created after actual receipt by Lender of Guarantor’s written revocation.  For this purpose and without limitation, the term “new Indebtedness” does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due.  This Guaranty will continue to bind Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior to receipt of Guarantor’s written notice of revocation, including any extensions, renewals, substitutions or modifications of the Indebtedness.  All renewals, extensions, substitutions, and modifications of the Indebtedness granted after Guarantor’s revocation, are contemplated under this Guaranty and, specifically will not be considered to be new Indebtedness.  This Guaranty shall bind Guarantor’s estate as to Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death.  Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect.  Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty.  A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.  It is anticipated that fluctuations may occur in the aggregate amount of Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of Indebtedness, even to zero dollars ($0.00), prior to Guarantor’s written revocation of this Guaranty shall not constitute a termination of this Guaranty.  This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the guaranteed Indebtedness remains unpaid and even though the Indebtedness guaranteed may from time to time be zero dollars ($0.00).

GUARANTOR’S AUTHORIZATION TO LENDER.  Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time:  (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and deceases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

GUARANTOR’S REPRESENTATIONS AND WARRANTIES.  Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition.  Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.

GUARANTOR’S FINANCIAL STATEMENTS.  Guarantor agrees to furnish Lender with the following:

Additional Requirements.  ANNUAL PERSONAL FINANCIAL STATEMENT.

All financial reports required to be provided under this Guaranty shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Guarantor as being true and correct.

GUARANTOR’S WAIVERS.  Except as prohibited by applicable law, Guarantor waives any right to acquire Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.

Guarantor also waives any and all rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness of Borrower to Lender which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.  If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS.  Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law.  If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender reserves a right of setoff in all Guarantor’s accounts with Lender (whether checking, savings, or some other account).  This includes all accounts Guarantor holds jointly with someone else and all accounts Guarantor may open in the future.  However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.  Guarantor authorizes Lender, to the extent permitted by applicable law, to hold these funds if there is a default, and Lender may apply the funds to these accounts to pay what Guarantor owes under the terms of this Guaranty.

SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR.  Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent.  Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower.  In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender.  Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness.  If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender.  Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of this Guaranty:

Amendments.  This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty.  No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Attorneys’ Fees; Expenses.  Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty.  Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement.  Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services.  Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

Caption Headings.  Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.

Governing Law.  This Guaranty will be governed by, construed and enforced in accordance with federal law and the laws of the State of Minnesota.  This Guaranty has been accepted by Lender in the State of Minnesota.

Integration.  Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty.  Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.

Interpretation.  In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them.  The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them.  If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced.  Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable.  If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any Loan indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

Notices.  Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty.  All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.”  Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address.  For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address.  Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.

No Waiver by Lender.  Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender.  No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right.  A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty.  No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a wavier of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions.  Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Successors and Assigns.  Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.

DEFINITIONS.  The following capitalized words and terms shall have the following meanings when used in this Guaranty.  Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America.  Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require.  Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:

Borrower.  The word “Borrower” means STERION INCORPORATED and includes all co-signers and co-makers signing the Note.

GAAP.  The word “GAAP” means generally accepted accounting principles.

Guarantor.  The word “Guarantor” means each and every person or entity signing this Guaranty, including without limitation [KENNETH W BRIMMER] [GARY COPPERUD].

Guaranty.  The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

Indebtedness.  The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.

Lender.  The word “Lender” means Citizens Independent Bank, its successors and assigns.

Note.  The word “Note” means and includes without limitation all of Borrower’s promissory notes and/or credit agreements evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for promissory notes or credit agreements.

Related Documents.  The words “Related Documents” means all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS.  IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”.  NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.  THIS GUARANTY IS DATED NOVEMBER 26, 2003.

GUARANTOR:

X

   [KENNETH W BRIMMER] [GARY COPPERUD]

Doc# 1832531\1.

Exhibit 10.12

STERION INCORPORATED

NONQUALIFIED

STOCK OPTION AGREEMENT

THIS AGREEMENT is entered into as of December 11, 2003 by and between STERION INCORPORATED, a Minnesota corporation (the “Company”) and [KENNETH W. BRIMMER] [GARY C. COPPERUD] (the “Participant”).

WHEREAS, effective January 3, 2000, the Board of Directors of the Company approved and adopted the 2000 Stock Option Plan (the “2000 Plan”), and implemented the 2000 Plan upon shareholder approval of the 2000 Plan on March 16, 2000, as subsequently amended on March 7, 2001, January 15, 2002 and April 23, 2003, respectively; and 

WHEREAS, the 2000 Plan is incorporated into and forms a part of this Agreement, and the Participant has been selected by the Board of Directors to receive a Nonqualified Stock Option under the 2000 Plan;

NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:

1.

Terms of Option.  The following terms used in this Agreement shall have the following meanings.

(a)

The “Participant” is [KENNETH W. BRIMMER][GARY C. COPPERUD].

(b)

The “Date of Grant” is December 11, 2003.

(c)

The number of  “Covered Shares” shall be FIFTY THOUSAND (50,000) shares of Common Stock.

(d)

The “Exercise Price” is $6.00 per share.

(e)

The “Expiration Date” is December 10, 2008.

2.

Grant of Option.  The Company hereby grants to the Participant an option (the “Option”) to purchase the number of Covered Shares of Common Stock at the Exercise Price per share as set forth in Section 1, subject to all of the terms and conditions of the 2000 Plan.  This Option is not intended to constitute an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

3.

Exercise of Option.

(a)

Date of Exercise.  The Option shall become exercisable and fully vested on December 11, 2003.  After the Option becomes exercisable with respect to any portion of the Covered Shares, it shall continue to be exercisable with respect to that portion of the Covered Shares until the Option expires.  The Option shall not be exercisable on or after the Expiration Date as set forth in Section 1.

(b)

Limitations on Exercise.  The Covered Shares shall not be issued unless the exercise of the Option and the issuance of such Covered Shares shall comply with all applicable provisions of the law and the applicable requirements of any stock exchange or Nasdaq.  As a condition to the exercise of all or any portion of the Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Covered Shares are being purchased only for investment and without any present intention to sell or distribute the Covered Shares.

4.

Termination of Relationship.  If the Option is an Incentive Stock Option or is, at any time, converted into an Incentive Stock Option, exercise of the Option is subject to the following:

(a)

Termination for Any Reason Except Death or Disability.  If Participant’s employment with the Company and all related companies is terminated for any reason other than for death or disability, the Option, to the extent that it would have been exercisable by the Participant on the Date of Termination, may be exercised by Participant no later than three months after such Date of Termination; provided, however, the Option shall not be exercisable after the Expiration Date.

(b)

Termination by Reason of Death or Disability.  If Participant’s employment with the Company and all related companies is terminated due to death or disability (within the meaning of Section 22(e)(3) of the Code) of the Participant, the Option, to the extent that it is exercisable on the Date of Termination, may be exercised by Participant (or Participant’s estate or legal representative) no later than one year after such Date of Termination; provided, however, the Option shall not be exercisable after the Expiration Date.

(c)

Date of Termination.  For purposes of this Agreement, the Participant’s “Date of Termination” shall be the first day occurring on or after the Date of Grant on which the Participant’s employment with the Company and all related companies terminates for any reason; provided that the Participant’s employment shall be treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days, or, if longer, so long as Participant’s right to re-employment is guaranteed either by statute or by contract.

5.

Method of Exercise.  The Option may be exercised in whole or in part by delivering a written notice (in such form as may be approved by the Committee) to the Secretary of the Company at its corporate headquarters prior to the Expiration Date.  Such written notice shall be accompanied by payment of the Exercise Price for such shares of Common Stock being purchased.  Payment shall be by cash or by check payable to the Company.  Except as otherwise provided by the Committee before the Option is exercised: (i) all or a portion of the Exercise Price may be paid by the Participant by delivery of shares of Common Stock acceptable to the Company and having an aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash that would otherwise be required; and (ii) the Participant may pay the Exercise Price by authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise.

6.

Tax Withholding.  All distributions under this Agreement are subject to withholding of all applicable taxes.  At the election of the Participant, and subject to such rules as may be established by the Committee, such withholding obligations may be satisfied through the surrender of shares of Common Stock which the Participant already owns, or to which the Participant is otherwise entitled under the 2000 Plan.

7.

Notice of Disqualifying Disposition of Shares.  If the Option is an Incentive Stock Option or is, at any time, converted to an Incentive Stock Option and if the Participant sells or otherwise disposes of any of the shares acquired pursuant to the Option on or before two years from the Date of Grant or one year following the exercise of the Option, the Participant shall immediately notify the Company in writing of such disposition.  The Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy any withholding requirements.

8.

Restriction on Transfer.  The Participant acknowledges that Participant may not sell or otherwise dispose of the Covered Shares in the absence of either a registration statement under the Securities Act of 1933, as amended (the “Act”), or an exemption from the registration provisions of the Act.  The Participant acknowledges that the certificate representing the Covered Shares purchased upon the exercise of the Option shall bear a legend in substantially the following form:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.  AS A RESULT, THE SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED UNLESS THE SHARES ARE COVERED BY AN EFFECTIVE REGISTRATION STATEMENT OR IF THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE SALE, TRANSFER OR PLEDGE IS EXEMPT FROM REGISTRATION UNDER APPLICABLE UNITED STATES FEDERAL AND STATE SECURITIES LAWS.

9.

Nontransferability of Option.  The Option is not transferable in any manner other than by will or by the laws of descent and distribution and may be exercised during the Participant’s life only by the Participant.  The terms of the Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Participant.

10.

Administration.  The authority to control and manage the operation and administration of this Agreement shall be vested in the Board of Directors or, if appointed by the Board, the Compensation Committee (the “Committee”), and the Board of Directors or the Committee, if any, shall have all powers with respect to this Agreement as it has with respect to the Plan.  Any interpretation of the Agreement by the Board of Directors or the Committee and any decision made by it with respect to the Agreement is final and binding.

11.

Plan Definitions.  Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement are subject to the terms of the 2000 Plan, a copy of which may be obtained by the Participant from the Secretary of the Company.

12.

No Effect on Terms of Director Relationship.  Nothing in this Agreement shall confer on the Participant any right with respect to continuation of a director relationship with the Company or any related company, or limit the right of the Company or any related company to terminate the Participant’s director relationship at any time, with or without cause.

13.

Successors and Assigns.  This Agreement shall be binding upon, and inure to the benefit of, the Company and its successor and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s business and assets.

14.

Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

15.

Participant Acknowledgment.  Participant hereby acknowledges receipt of a copy of the 2000 Plan.  Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all the terms and conditions of the 2000 Plan and this Agreement.

IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the date of this Agreement.

PARTICIPANT

STERION INCORPORATED

/s/

By 

/s/  Mark Buckrey

Signature

Mark Buckrey

Chief Financial Officer

[Kenneth W. Brimmer]  [Gary C. Copperud]  

Print Name

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