LSC, INCORPORATED
[FORM OF INCENTIVE STOCK OPTION AGREEMENT
UNDER 2000 STOCK INCENTIVE PLAN]
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into and effective as of this _____ day of
__________, 20___ (the "Date of Grant"), and is by and between LSC,
Incorporated, a Minnesota corporation (the "Company"), and _____________________
(the "Optionee").
A. The Company has adopted the LSC, Incorporated 2000 Stock Incentive
Plan (the "Plan") authorizing the Board of Directors of the Company (the
"Board"), or a committee as provided for in the Plan (the Board or such a
committee to be referred to as the "Committee"), to grant stock options and
other Incentive Awards (as defined in the Plan) to employees and non-employee
directors, consultants and independent contractors of the Company and its
Subsidiaries (as defined in the Plan).
B. The Company desires to give the Optionee an inducement to acquire a
proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Optionee an option to purchase
shares of common stock of the Company pursuant to the Plan.
Accordingly, the parties agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to the Optionee the right, privilege, and option
(the "Option") to purchase ____________________ (__________) shares (the "Option
Shares") of the Company's common stock, $.01 par value per share (the "Common
Stock"), according to the terms and subject to the conditions hereinafter set
forth and as set forth in the Plan. If and to the extent that the Option
qualifies as an "incentive stock option," as that term is used in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and consistent with
the provisions of Section 6.6 of the Plan, the Option is intended to be an
incentive stock option within the meaning of such term. The Optionee
acknowledges and agrees, however, that the Company makes no assurance or
warranty of any kind regarding the qualification of the Option as an "incentive
stock option" as such term is used in Section 422 of the Code.
2. OPTION EXERCISE PRICE.
The per share price to be paid by Optionee in the event of an exercise of
the Option will be $_____.
3. DURATION OF OPTION AND TIME OF EXERCISE.
3.1 PERIOD OF EXERCISABILITY. So long as the Optionee remains employed by
the Company or one or more of its Subsidiaries, the Option will become
exercisable with respect to the Option Shares in four (4) equal annual
installments, rounded (on an aggregate basis) to the
next highest whole number of Option Shares, but in any event not to exceed the
aggregate maximum of ____________________ (__________) Option Shares. The
initial installment of the Option Shares shall become exercisable on the first
anniversary of the Date of Grant, with each additional installment becoming
exercisable on each of the three subsequent yearly anniversaries of the Date of
Grant (so long as the Optionee remains employed by the Company or one or more of
its Subsidiaries) until the Option Shares are fully exercisable. The foregoing
rights to exercise this Option will become void and expire as to all unexercised
Option Shares at 5:00 p.m. (Minneapolis, Minnesota time) on __________, 20__
(the "Time of Termination"), subject to earlier expiration as set forth below.
3.2 TERMINATION OF EMPLOYMENT OR OTHER SERVICE.
(a) TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event
that the Optionee's employment or other service with the Company and all
Subsidiaries is terminated by reason of the Optionee's death or the
Optionee's Disability or Retirement (as defined in the Plan), this Option,
shall become immediately exercisable in full and remain exercisable after
such termination for three months in the case of Retirement and one year in
the case of death of Disability (but in no event after the Time of
Termination).
(b) TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR
RETIREMENT. In the event that the Optionee's employment or other service
with the Company and all Subsidiaries is terminated for any reason other
than death, Disability or Retirement, or the Optionee is in the employ or
service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the
Company (unless the Optionee continues in the employ or service of the
Company or another Subsidiary), all rights of the Optionee under the Plan
and this Agreement will immediately terminate without notice of any kind,
and this Option will no longer be exercisable; provided, however, that if
such termination is due to any reason other than termination by the Company
or any Subsidiary for "cause" (as defined in the Plan), this Option, to the
extent that it is currently exercisable by the Optionee as of the time of
such termination, will remain exercisable for a period of three months
after such termination (but in no event after the Time of Termination).
3.3 CHANGE IN CONTROL.
(a) IMPACT OF CHANGE IN CONTROL. If a Change in Control (as defined
in the Plan) occurs and (i) the Company terminates the Participant's
employment or service for any reason other than death, Disability, cause
(as defined in the Plan), "poor job performance" (as defined below) within
twelve (12) months after the Change in Control or (ii) the Participant
terminates employment or service with the Company for Good Reason (as
defined below) within twelve (12) months after the Change in Control, then
all Options shall vest and be immediately exercisable in full as of the
date of such termination of employment or service by the Company or the
Participant, as the case may be, and shall remain exercisable until the
Time of Termination. In addition, if a Change in Control of the Company
occurs, the Committee, in its sole discretion and without the consent of
the Optionee, may determine that the Optionee will receive, with respect to
some or all of the Option Shares, as of the effective date of any such
Change in Control of the Company, cash in an amount equal to the excess of
the Fair Market Value (as defined in the Plan) of such Option Shares
immediately prior to the effective date of such
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Change in Control of the Company over the option exercise price per share
of this Option. For purposes of this Agreement, "Good Reason" shall mean,
without the Participant's prior written consent, (i) a material adverse
change in the Participant's authority, duties or responsibilities as in
effect prior to the Change in Control; (ii) a reduction by the Company in
the Participant's base salary, or a material adverse change in the form or
timing of the payment thereof, as in effect immediately prior to the Change
in Control or as thereafter increased; or (iii) the failure by the Company
to cover the Participant under benefit plans that, in the aggregate,
provide substantially similar benefits to Participant (and/or Participant's
family and dependents) at a substantially similar cost to Participant
relative to the benefits and total costs under the benefit plans in which
Participant (and/or Participant's family and dependents) was participating
at any time during the 90 days immediately preceding the Change in Control;
(iv) the Company's requiring the Participant to be based at any office or
location that is more than fifty (50) miles further from the office or
location thereof immediately preceding a Change in Control; provided,
however, Good Reason shall not include any of the circumstances or events
described herein unless the Participant has first provided written notice
of such circumstance or event and the Company has not corrected such
circumstance or event within thirty (30) days of receipt by the Company of
such written notice from the Participant. For purposes of this Agreement,
"poor job performance" means the failure of the Optionee to perform the
duties of his or her position, as in effect immediately prior to the Change
in Control and as reasonably determined by the Company, after the Company
has given the Optionee written notice of such failure and a reasonable
opportunity to correct such failure.
(b) LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding
anything in this Section 3.3 to the contrary, if, with respect to the
Optionee, acceleration of the vesting of this Option or the payment of cash
in exchange for all or part of the Option Shares as provided above (which
acceleration or payment could be deemed a "payment" within the meaning of
Section 280G(b)(2) of the Code), together with any other payments which the
Optionee has the right to receive from the Company or any corporation which
is a member of an "affiliated group" (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) of the Code) of which the Company is
a member, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code), the payments to the Optionee as set forth herein
will be reduced to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the
Code; provided, however, that if the Optionee is subject to a separate
agreement with the Company or a Subsidiary that expressly addresses the
potential application of Sections 280G or 4999 of the Code (including,
without limitation, that "payments" under such agreement or otherwise will
be reduced, that such "payments" will not be reduced or that the Optionee
will have the discretion to determine which "payments" will be reduced),
then this Section 3.3(b) will not apply, and any "payments" to the Optionee
pursuant to Section 3.3(a) of this Agreement will be treated as "payments"
arising under such separate agreement.
4. MANNER OF OPTION EXERCISE.
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4.1 NOTICE. This Option may be exercised by the Optionee in whole or in
part from time to time, subject to the conditions contained in the Plan and in
this Agreement, by delivery, in person, by facsimile or electronic transmission
or through the mail, to the Company at its principal executive office in Eagan,
Minnesota (Attention: Chief Financial Officer), of a written notice of
exercise. Such notice must be in a form satisfactory to the Committee, must
identify the Option, must specify the number of Option Shares with respect to
which the Option is being exercised, and must be signed by the person or persons
so exercising the Option. Such notice must be accompanied by payment in full of
the total purchase price of the Option Shares purchased. In the event that the
Option is being exercised, as provided by the Plan and Section 3.2 above, by any
person or persons other than the Optionee, the notice must be accompanied by
appropriate proof of right of such person or persons to exercise the Option. As
soon as practicable after the effective exercise of the Option, the Optionee
will be recorded on the stock transfer books of the Company as the owner of the
Option Shares purchased, and the Company will deliver to the Optionee one or
more duly issued stock certificates evidencing such ownership.
4.2 PAYMENT. At the time of exercise of this Option, the Optionee will
pay the total purchase price of the Option Shares to be purchased entirely in
cash (including a check, bank draft or money order, payable to the order of the
Company); provided, however, that the Committee, in its sole discretion, may
allow such payment to be made, in whole or in part, by tender of a promissory
note (on terms acceptable to the Committee in its sole discretion) or a Broker
Exercise Notice or Previously Acquired Shares (as such terms are defined in the
Plan), or by a combination of such methods. In the event the Optionee is
permitted to pay the total purchase price of this Option in whole or in part
with Previously Acquired Shares, the value of such shares will be equal to their
Fair Market Value on the date of exercise of this Option.
5. RIGHTS OF OPTIONEE; TRANSFERABILITY.
5.1 EMPLOYMENT OR SERVICE. Nothing in this Agreement will interfere with
or limit in any way the right of the Company or any Subsidiary to terminate the
employment or service of the Optionee at any time, nor confer upon the Optionee
any right to continue in the employ or service of the Company or any Subsidiary
at any particular position or rate of pay or for any particular period of time.
5.2 RIGHTS AS A SHAREHOLDER. The Optionee will have no rights as a
shareholder unless and until all conditions to the effective exercise of this
Option (including, without limitation, the conditions set forth in the Plan)
have been satisfied and the Optionee has become the holder of record of such
shares. No adjustment will be made for dividends or distributions with respect
to this Option as to which there is a record date preceding the date the
Optionee becomes the holder of record of such shares, except as may otherwise be
provided in the Plan or determined by the Committee in its sole discretion.
5.3 RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will or the
laws of descent and distribution or as otherwise expressly permitted by the
Plan, no right or interest of the Optionee in this Option prior to exercise may
be assigned or transferred, or subjected to any lien, during the lifetime of the
Optionee, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise. The Optionee will, however, be entitled to
designate a beneficiary to receive this Option upon such Optionee's death, and,
in the event of the
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Optionee's death, exercise of this Option (to the extent permitted pursuant to
Section 3.2(a) of this Agreement) may be made by the Optionee's legal
representatives, heirs and legatees.
5.4 BREACH OF CONFIDENTIALITY OR NON-COMPETE AGREEMENTS. Notwithstanding
anything in this Agreement or the Plan to the contrary, in the event that the
Optionee materially breaches the terms of any confidentiality or non-compete
agreement entered into with the Company or any Subsidiary, whether such breach
occurs before or after termination of the Optionee's employment or other service
with the Company or any Subsidiary, the Committee in its sole discretion may
immediately terminate all rights of the Optionee under the Plan and this
Agreement without notice of any kind.
6. SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other provision
of the Plan or this Agreement, the Company will not be required to issue, and
the Optionee may not sell, assign, transfer or otherwise dispose of, any Option
Shares, unless (a) there is in effect with respect to the Option Shares a
registration statement under the Securities Act of 1933, as amended, and any
applicable state or foreign securities laws or an exemption from such
registration, and (b) there has been obtained any other consent, approval or
permit from any other regulatory body which the Committee, in its sole
discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on certificates
representing Option Shares, as may be deemed necessary or advisable by the
Company in order to comply with such securities law or other restrictions.
7. WITHHOLDING TAXES.
The Company is entitled to (a) withhold and deduct from future wages of
the Optionee (or from other amounts that may be due and owing to the Optionee
from the Company), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any federal, state or local withholding
and employment-related tax requirements attributable to the grant or exercise of
this Option or otherwise incurred with respect to this Option, or (b) require
the Optionee promptly to remit the amount of such withholding to the Company
before acting on the Optionee's notice of exercise of this Option. In the event
that the Company is unable to withhold such amounts, for whatever reason, the
Optionee agrees to pay to the Company an amount equal to the amount the Company
would otherwise be required to withhold under federal, state or local law.
8. ADJUSTMENTS.
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or extraordinary dividend
(including a spin-off), or any other change in the corporate structure or shares
of the Company, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of the
Optionee, will make appropriate adjustment (which determination will be
conclusive) as to the number and kind of securities or other property (including
cash) subject to, and the exercise price of, the Option.
9. SUBJECT TO PLAN.
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The Option and the Option Shares granted and issued pursuant to this
Agreement have been granted and issued under, and are subject to the terms of,
the Plan. The terms of the Plan are incorporated by reference in this Agreement
in their entirety, and the Optionee, by execution of this Agreement,
acknowledges having received a copy of the Plan. The provisions of this
Agreement will be interpreted as to be consistent with the Plan, and any
ambiguities in this Agreement will be interpreted by reference to the Plan. In
the event that any provision of this Agreement is inconsistent with the terms of
the Plan, the terms of the Plan will prevail.
10. MISCELLANEOUS.
10.1 BINDING EFFECT. This Agreement will be binding upon the heirs,
executors, administrators and successors of the parties to this Agreement.
Without limiting the preceding sentence, the term "Company" in this Agreement
refers to successors or the Company and the term "Optionee" in this Agreement
refers to the heirs, executors, administrators and successors of the Optionee.
10.2 GOVERNING LAW. This Agreement and all rights and obligations under
this Agreement will be construed in accordance with the Plan and governed by the
laws of the State of Minnesota, without regard to conflicts of laws provisions.
Any legal proceeding related to this Agreement will be brought in an appropriate
Minnesota court, and the parties to this Agreement consent to the exclusive
jurisdiction of the court for this purpose.
10.3 ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire
agreement and understanding of the parties to this Agreement with respect to the
grant and exercise of this Option and the administration of the Plan and
supersede all prior agreements, arrangements, plans and understandings relating
to the grant and exercise of this Option and the administration of the Plan.
10.4 AMENDMENT AND WAIVER. Other than as provided in the Plan, this
Agreement may be amended, waived, modified or canceled only by a written
instrument executed by the parties to this Agreement or, in the case of a
waiver, by the party waiving compliance.
(BALANCE OF PAGE INTENTIONALLY BLANK)
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The parties to this Agreement have executed this Agreement effective the day and
year first above written.
LSC, INCORPORATED
By
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Its
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By execution of this Agreement, OPTIONEE
the Optionee acknowledges having
received a copy of the Plan. --------------------------------------
(Signature)
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(Name and Address)
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