<SEC-DOCUMENT>0000897101-12-000427.txt : 20120309
<SEC-HEADER>0000897101-12-000427.hdr.sgml : 20120309
<ACCEPTANCE-DATETIME>20120309160655
ACCESSION NUMBER:		0000897101-12-000427
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20120301
ITEM INFORMATION:		Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20120309
DATE AS OF CHANGE:		20120309

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			COMMUNICATIONS SYSTEMS INC
		CENTRAL INDEX KEY:			0000022701
		STANDARD INDUSTRIAL CLASSIFICATION:	TELEPHONE & TELEGRAPH APPARATUS [3661]
		IRS NUMBER:				410957999
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-31588
		FILM NUMBER:		12680735

	BUSINESS ADDRESS:	
		STREET 1:		213 S MAIN ST
		CITY:			HECTOR
		STATE:			MN
		ZIP:			55342
		BUSINESS PHONE:		3208486231

	MAIL ADDRESS:	
		STREET 1:		213 MAIN STREET
		STREET 2:		P O BOX 777
		CITY:			HECTOR
		STATE:			MN
		ZIP:			55342
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>csi121044_8k.htm
<DESCRIPTION>FORM 8-K DATED MARCH 1, 2012
<TEXT>
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 <P ALIGN=CENTER><FONT SIZE=4><B>UNITED STATES</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=4><B>SECURITIES AND EXCHANGE COMMISSION</B></FONT></P>
 </TD>
 </TR>
 <TR>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
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 <P ALIGN=CENTER><FONT SIZE=2><B>Washington, D.C. 20549</B></FONT></P>
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 <P ALIGN=CENTER><FONT SIZE=6><B>FORM 8-K</B></FONT></P>
 </TD>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
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 <P ALIGN=CENTER><FONT SIZE=2><B>&nbsp;</B></FONT></P>


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 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>CURRENT
 REPORT</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>PURSUANT
 TO SECTION 13 OR 15(d) OF</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>THE
 SECURITIES EXCHANGE ACT OF 1934</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3>Date
 of Report (date of earliest event reported): <B>March 1, 2012</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
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 </TR>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
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 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P ALIGN=CENTER><FONT SIZE=2><B>&nbsp;</B></FONT></P>


 </TD>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=6><B>Communications Systems, Inc.</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE="2"> (Exact name of Registrant as Specified in
its Charter) </FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="31%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="28%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="31%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>Minnesota</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P ALIGN=CENTER><FONT SIZE=3><B>001-31588</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>41-0957999</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>(State Or Other Jurisdiction <BR>
 Of Incorporation)</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>(Commission File Number)</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>(I.R.S. Employer Identification No.)</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=4 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>10900 Red
 Circle Drive Minnetonka, MN</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3><B>55343</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=4 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>(Address
 Of Principal Executive Offices)</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>(Zip
 Code)</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=4 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=3>Registrant&#146;s Telephone
 Number, Including Area Code <B>(952) 996-1674</B></FONT></P>
 </TD>
 </TR>

 <TR>
 <TD COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P ALIGN=CENTER><FONT SIZE=2><B>&nbsp;</B></FONT></P>


 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
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 <TD COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
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 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=3>Check
 the appropriate box below if the Form 8-K filing is intended to
 simultaneously satisfy the filing obligation of the registrant under any of
 the following provisions (<I>see </I>General
 Instruction A.2. below):</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=3 FACE=WINGDINGS>o</FONT><FONT  SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Written
 communications pursuant to Rule 425 under the Securities Act</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=3 FACE=WINGDINGS>o</FONT><FONT  SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Soliciting
 material pursuant to Rule 14a-12 under the Exchange Act</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=3 FACE=WINGDINGS>o</FONT><FONT  SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-commencement
 communications pursuant to Rule 14d-2(b) under the Exchange Act</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=5 VALIGN=TOP>
 <P><FONT SIZE=3 FACE=WINGDINGS>o</FONT><FONT  SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-commencement
 communications pursuant to Rule 13e-4(c) under the Exchange Act</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>
<div style="border-bottom: 1pt solid black; font-size: 1pt; width: 100%;"></div>
<div style="border-bottom: 4pt solid black; font-size: 1pt; width: 100%;"></div>
<br>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2>Items under
Sections 1, 2, 3, 4, 6 and 7 are not applicable and therefore omitted.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="15%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="85%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=3><U><B>ITEM
 5.02</B></U></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=3><U><B>DEPARTURE
 OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF
 CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS</B></U><FONT SIZE=3><B>.</B></FONT></FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>2011 Short Term Incentive Plan Payouts</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 1, 2012, the Compensation Committee and the Board of Directors of
Communications Systems, Inc. (the &#147;Company&#148;) approved the total amount of cash
incentive payments and stock grants to the Company&#146;s current senior executive
officers and business unit leaders (&#147;Senior Executives&#148;) under the Company&#146;s
2011 short term incentive compensation plan for executive officers (the &#147;2011
Short Term Incentive Plan&#148;). Cash payments and stock grants are based upon
achievement in relation to quarterly and annual goals with respect to sales,
operating income, inventory levels and outstanding receivables that were
approved by the Compensation Committee in March 2011. Short term incentive
compensation is paid primarily in cash, but stock grants are made if actual
revenues exceed 110% of target revenues during a quarter or over the full
fiscal year. The following table summarizes the total amount paid and to be
paid in cash and stock grants under the Company&#146;s 2011 Short Term Incentive
Plan to the Company&#146;s Senior Executives. </FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="64%" VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
 </TD>
 <TD WIDTH="2%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="1%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=BOTTOM>
 <P ALIGN=RIGHT>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="2%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="8%" VALIGN=BOTTOM>
 <P ALIGN=RIGHT>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=BOTTOM>
 <P ALIGN=RIGHT>&nbsp;</P>
 </TD>
 <TD WIDTH="1%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2><B>Name of Senior Executive</B></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=4 VALIGN=BOTTOM nowrap>
 <P ALIGN=CENTER><FONT SIZE=2><B>2011 Short Term <BR>
 Cash Incentive Pay</B></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=2><B>Stock Grants</B></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=4 VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>William G. Schultz,<BR>
 President &amp; Chief Executive Officer</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>213,916</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>589</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>David T. McGraw,<BR>
 Chief Financial Officer</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>172,884</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>456</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Bruce Blackwood,<BR>
 Vice President &amp; General Manager, Suttle</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>63,593</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>__</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Sev Sadura,<BR>
 Vice President &amp; General Manager, Transition Networks, Inc.</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>97,489</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>932</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Karen Nesburg Bleick,<BR>
 V.P. of Human Resources</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>55,129</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>145</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
</TABLE>
<BR><BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2><B>2011 Payouts under
the Company&#146;s Long Term Incentive Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 1, 2012, the Compensation Committee and the Board of Directors approved
amounts earned for 2011 under the Company&#146;s Performance Unit Incentive Plan
(&#147;PUP Plan&#148;) for the 2008 &#150; 2011 performance period. Payments under the PUP
Plan for the 2008 to 2011 performance period are based upon actual achievement
as compared to annual goals for return on assets and
operating income that were established by the Compensation Committee and
approved by the Company&#146;s Board of Directors in March 2011. The following table
summarizes the approved payouts for 2011 under the PUP Plan to the Company&#146;s
Senior Executives.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="73%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="2%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="8%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="1%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=BOTTOM>
 <P ALIGN=RIGHT>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="1%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2><B>Name of Senior Executive</B></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=4 VALIGN=BOTTOM nowrap>
 <P ALIGN=CENTER><FONT SIZE=2><B>2011 Amount Earned <BR>
 under 2008-2011 PUP Plan</B></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>William G. Schultz,<BR>
 President &amp; Chief Executive Officer</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>53,710</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>David T. McGraw,<BR>
 Chief Financial Officer</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>50,282</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Bruce Blackwood,<BR>
 Vice President &amp; General Manager, Suttle</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>13,137</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Sev Sadura,<BR>
 Vice President &amp; General Manager, Transition Networks, Inc.</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>__</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Karen Nesburg Bleick,<BR>
 V.P. of Human Resources</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>$</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>14,366</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Adoption of Annual
Bonus Plan and Grant of 2012 Awards Under the Annual Bonus Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 1, 2012, the Board of Directors of Communications Systems, Inc. (the
&#147;Company&#148;) approved a new plan for annual incentive compensation called the
Communications Systems, Inc. Annual Bonus Plan (&#147;Annual Bonus Plan&#148;). Pursuant
to the Annual Bonus Plan, on March 1, 2012 the Compensation Committee and the
Board awarded bonus opportunities to the Senior Executives named above. The
Annual Bonus Plan is a sub-plan of the 2011 Executive Incentive Compensation
Plan approved by the Company&#146;s shareholders in May 2011.</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Annual Bonus Plan, the Company determines quarterly and annual minimum,
target and maximum performance goals. The performance goals are weighted such
that 50% of the bonus opportunity is tied to achievement of quarterly or six
month performance goals and 50% of the bonus opportunity is tied to achievement
of performance goals for the fiscal year. Performance measures applicable to
Senior Executives include revenue, operating income, international revenue,
revenue from new products, inventory levels and outstanding revenues, but
primary weight is given to achieving revenue and operating income targets.
Bonuses earned based on achievement in comparison to quarterly and six month
goals during the first nine months of the fiscal year are paid approximately 45
days after the period measured and bonuses earned based on achievement in
comparison in the fourth quarter and over the full year are paid out
approximately 75 days after fiscal year end. Payments of bonuses generally
begin at achievement exceeding 80% of target performance goals. Bonuses are
paid primarily in cash, but stock grants are made in lieu of cash if actual
revenues exceed 110% of target revenues during a quarter or over the full
fiscal year. The target and maximum bonus Senior Executives may potentially
earn under the Annual Bonus Plan is based upon a percentage of their respective
salaries. Under the 2012 Plan, the maximum bonus that may be paid to any
participant may not exceed two
times his or her bonus at target for revenues and 1.5 times his or her bonus at
target for operating income even if financial performance exceeds the maximum.
Further, no bonus amounts will be earned by any participant for a quarter or
the year if the minimum goals for that period are not achieved. Senior Executives
must be employed by the Company as of the end of the relevant period (quarter,
six month or full fiscal year) in order to be entitled to receive payout of any
bonus earned for such period, unless termination of employment is due to death,
disability or follows a change of control. The Compensation Committee must
approve bonuses paid to Senior Executives before payment.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows potential bonus amounts as a percentage of salary that
may be earned by the Senior Executives for 2012 performance under the Annual
Bonus Plan upon the Company&#146;s achievement of the target and maximum goals
related to revenues, operating income, international revenues, new product
development, inventory levels and receivables outstanding, assuming achievement
at target and maximum level. Under the matrices associated with the 2012 Annual
Bonus Plan achievement of the performance goals at less than target level
results in a decreasing bonus and if achievement fails to meet the minimum
performance goals the participant is entitled to no bonus.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="45%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=8 VALIGN=TOP  STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P ALIGN=CENTER><FONT SIZE="2"><B>Bonus Opportunity As a Percentage of Base Salary<BR> Under the Annual
Bonus Plan for 2012 Performance<BR><BR></B> </FONT></P>


 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P><FONT SIZE="2"><B>Executive
Officer and Title</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE="1"><B>&nbsp;</B> </FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P ALIGN=CENTER><FONT SIZE="2"><BR><B>Cash Payable If Target Goals Achieved</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE="1"><B>&nbsp;</B> </FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P ALIGN=CENTER><FONT SIZE="2"><B>Cash Payable If Maximum Goals Achieved</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE="1"><B>&nbsp;</B> </FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P ALIGN=CENTER><FONT SIZE="2"><B>Stock Grant Value If Maximum Goals Achieved</B> </FONT></P>


 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>William G. Schultz,<BR>
 President &amp; CEO</FONT></P>
 </TD>
 <TD VALIGN=TOP BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>70%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>103%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>10%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>David T. McGraw,<BR>
 Chief Financial Officer</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>55%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>85%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Bruce Blackwood,<BR>
 General Manager, Suttle</FONT></P>
 </TD>
 <TD VALIGN=TOP BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>50%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>80%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>7.5%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Sev Sadura,<BR>
 General Manager, Transition<BR>
 Networks, Inc.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>50%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>80%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7.5%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Karen Nesburg Bleick,<BR>
 V.P. of Human Resources</FONT></P>
 </TD>
 <TD VALIGN=TOP BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>30%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>47%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>4.5%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
</TABLE>
<BR><BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2><B>Amendment of Long
Term Incentive Plan and Grant of Awards under the Long Term Incentive Plan</B></FONT></P>


<P><FONT SIZE=2>On March 1,
2012 the Board of Directors of the Company approved amendments to the Company&#146;s
PUP Plan primarily to adapt it to become a sub-plan of the Company&#146;s 2011
Executive Incentive Compensation Plan, which was approved by the Company&#146;s
shareholders in May 2011. In addition, the PUP Plan was re-named as the
Communications Systems, Inc. Long Term Incentive Compensation Plan (the &#147;Long
Term Plan&#148;). On March 1, 2012 the Board also awarded opportunities to earn long
term incentive compensation under the Long Term Plan to Senior Executives
identified above. Under the Long Term Plan, the Company determines performance
measures for successive three year periods (performance periods) at minimum,
target and maximum levels of performance. For the 2012 to 2014 performance
period, the two performance measures are consolidated pretax average return on
assets over the three year period and consolidated cumulative revenue over the
three year period. Following 2014 the Compensation Committee will assess actual
performance against the performance measures established and pay incentive
compensation earned 25% in cash and 75% in stock. The number of shares that are
issued following the end of the performance period is the earned amount
expressed in dollars divided by the average share price for the Company&#146;s
common stock over the 20 business days beginning March 1, 2012. Following the
end of the Performance Period, the Compensation Committee must approve amounts
earned under the Long Term Plan. The following table shows the value of the
long term awards as a percentage of salary that may be earned by the Senior
Executives under the 2012-2014 Long Term Plan upon the Company&#146;s achievement of
target and maximum goals. Under the matrices associated with the 2012 Long Term
Plan, achievement of the performance goals at less than target levels result in
a decreasing level of long term compensation and if achievement fails to meet
the minimum performance goals the participant will not be entitled to any
payment under the Long Term Plan.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="53%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="10%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="8%" VALIGN=BOTTOM>
 <P ALIGN=RIGHT>&nbsp;</P>
 </TD>
 <TD WIDTH="10%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="10%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=BOTTOM>
 <P ALIGN=RIGHT>&nbsp;</P>
 </TD>
 <TD WIDTH="1%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=5 VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P ALIGN=CENTER><FONT SIZE="2"><B>2012 Long Term Incentive Pay Opportunity As a <BR>
Percentage of Base Salary Under the Company&#146;s <BR>
Long Term Incentive Plan</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
<P><FONT SIZE="1"><B>&nbsp;</B> </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P><FONT SIZE="2"><B>Executive
Officer and Title</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
<P><FONT SIZE="1"><B>&nbsp;</B> </FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P ALIGN=CENTER><FONT SIZE="2"><BR><B>Target Goals Achieved</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE="1"><B>&nbsp;</B> </FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=BOTTOM STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
<P ALIGN=CENTER><FONT SIZE="2"><B>Maximum Goals Achieved</B> </FONT></P>


 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>William G. Schultz,<BR>
 President &amp; Chief Executive Officer</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>70</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>140</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>David T. McGraw,<BR>
 Chief Financial Officer</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>42</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>84</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Bruce Blackwood,<BR>
 Vice President &amp; General Manager,<BR>
 Suttle</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>35</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>70</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Sev Sadura,<BR>
 Vice President &amp; General Manager,<BR>
 Transition Networks, Inc.</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>35</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>70</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>Karen Nesburg Bleick,<BR>
 V.P. of Human Resources</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>14</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P ALIGN=RIGHT><FONT SIZE=2>28</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=2>%</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM BGCOLOR="#D6F3E8">
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>
<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="15%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="85%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=3><U><B>ITEM
 9.01</B></U></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=3><U><B>FINANCIAL
 STATEMENTS AND EXHIBITS.</B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="11%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="80%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP nowrap STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P><FONT SIZE=2><B>Exhibit No.</B></FONT></P>


 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P><FONT SIZE=2><B>Description</B></FONT></P>


 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>99.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Communications
 Systems Inc. Annual Bonus Plan</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>99.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Communications
 Systems Inc. Long Term Incentive Plan, as amended through March 1, 2012.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=3><B>SIGNATURE</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="56%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="38%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="1%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>COMMUNICATIONS
 SYSTEMS, INC.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>By:</FONT></P>
 </TD>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P><FONT SIZE=2>/s/ David T.
 McGraw</FONT></P>


 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>David T.
 McGraw</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Chief
 Financial Officer</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Date: March
 9, 2012</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR><BR><BR><BR><BR><BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>csi121044_ex99-1.htm
<DESCRIPTION>COMMUNICATIONS SYSTEMS, INC. ANNUAL BONUS PLAN
<TEXT>
<HTML>
<HEAD><TITLE></TITLE></HEAD>
<BODY>

<P ALIGN=RIGHT><FONT SIZE=3><B>Exhibit
99.1</B></FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT SIZE=3><B>COMMUNICATION
SYSTEMS, INC.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>ANNUAL
BONUS PLAN</B></FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=RIGHT><FONT SIZE=2>Approved by the Board of Directors on March
1, 2012</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="32%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="13%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="35%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX" nowrap>
 <P ALIGN=CENTER><FONT SIZE=2><B>Table of Contents</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P><FONT SIZE=2><B>Section</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P ALIGN=CENTER><FONT SIZE=2><B>Page</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>


 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>


 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Section 1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Establishment
 and General Purpose of the Plan</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Section 2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Definitions</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Section 3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Administration
 of the Plan For Bonus Awards to Senior Executives</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>2</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Section 4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Administration
 of the Plan for Bonus Awards to Company Employees.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Section 5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Other
 Provisions Applicable to All Bonus Awards</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>4</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Section 6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Term;
 Amendment and Termination</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP nowrap>
 <P><FONT SIZE=2>Section 7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>Miscellaneous</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P ALIGN=JUSTIFY>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 1.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><U><B>Establishment and General Purpose of the
 Plan</B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P ALIGN=JUSTIFY>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>1.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Establishment</U></I>.
 The name of this plan is the &#147;Communications Systems, Inc. Annual Bonus Plan&#148;
 (the &#147;Plan&#148;). The Plan shall be effective beginning with the Company&#146;s fiscal
 year beginning January 1, 2012. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>1.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Relation to 2011 Executive Incentive
 Compensation Plan</U></I>. This is a sub-plan to the Company&#146;s 2011 Executive Incentive
 Compensation Plan (the &#147;EIC Plan&#148;). Unless otherwise expressly provided
 herein, all provisions of the EIC Plan, to the extent relevant to the terms
 of this Plan, shall be applicable to and are hereby incorporated by reference
 into this Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>1.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Purpose</U></I>. The
 purpose of this Plan is to provide a comprehensive framework pursuant to
 which opportunities for incentive compensation generally covering periods of
 one year or less can be awarded to Senior Executives and other employees of
 Communications Systems, Inc. in order to focus their efforts on achievement
 of near term financial objectives critical to the success of the Company; to
 reward accomplishments when performance meets or exceeds established targets
 or business plan objectives; and to more closely tie their compensation to
 the annual financial results of the Company. </FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="99%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 2.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><U><B>Definitions</B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<P ALIGN="JUSTIFY"><FONT SIZE=2>All capitalized terms used
herein shall have the meanings assigned to such terms in the EIC Plan, except
that terms defined in this Section 2 shall have the meanings respectively
indicated, but solely for purposes of this Plan.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Bonus Award</U>&#148; means the grant of an opportunity to receive a
 payment in cash upon achievement of Performance Goals as of the end of a
 Performance Period as determined by the Committee or Internal Committee in
 accordance with, respectively, Section 3 or Section 4 of the Plan; <U>provided
 that</U>, with respect to Senior Executives, a Bonus Award may include an
 award of Shares. A Bonus Award shall constitute an &#147;Other Award&#148; as defined
 in the EIC Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><U> &#147;Bonus Award Agreement</U>&#148; means a written
 agreement between the Company and a Participant describing a Bonus Award for
 such Participant.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Company Employee</U>&#148; means each Employee of the Company other
 than a Senior Executive.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.4</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Compensation Committee</U>&#148; means the Compensation Committee of
 the Board of Directors, and has the same meaning as &#147;Committee&#148; in the EIC
 Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.5</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Employee</U>&#148; means a person who performs services for the
 Company and who is regularly paid through the payroll of the Company, whether
 or not a Senior Executive or member of the Board, but, unless otherwise
 expressly determined by the Internal Committee, this term does not include
 (i) any temporary employee, (ii) any person serving the Company only as a member of the Board of Directors, and
 (iii) any person eligible for other forms of variable compensation (e.g.,
 commissions).</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>1</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.6</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Internal Committee</U>&#148; means a committee of the Company which
 shall consist of the individuals serving in the following positions as
 Company officers: Chief Executive Officer, Chief Financial Officer, Vice
 President of Human Resources, and Controller, as well as any other person
 designated by the Compensation Committee.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.7</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Participant</U>&#148; means any Senior Executive or Company Employee
 who is eligible and is selected by the Compensation Committee or the Internal
 Committee to participate in the Plan under, respectively, Section 3 or
 Section 4 herein.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.8</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Payout</U>&#148; means a payment of the cash or (in the case of Senior
 Executives) Shares earned in relation to the Performance Goals specified in
 the Bonus Award Agreement.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.9</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Performance Period</U>&#148; means a measuring period of time
 determined by the Committee or Internal Committee that is twelve months or
 less, over which the Performance Goals established by the Committee must be
 achieved to earn a Payout under a Bonus Award.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.10</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Plan</U>&#148; means this Annual Bonus Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.11</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Plan Year</U>&#148; means the applicable fiscal year of the Company.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>2.12</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;<U>Senior Executive</U>&#148; means the (i) Company&#146;s Chief Executive
 Officer, (ii) the Company&#146;s Chief Financial Officer, (iii) other members of
 the Company&#146;s corporate staff earning a base salary of at least $100,000 per
 annum, (iv) General Managers of the Company&#146;s business units, and (v) any
 other person who is or could become a Named Executive Officer under Section
 402 of SEC Registration S-K. </FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 3.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><U><B>Administration of the Plan For Bonus Awards to Senior Executives </B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>3.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Administration</U></I>.
 The Compensation Committee shall administer the Plan with respect to Bonus
 Awards for Senior Executives pursuant to this Section 3. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>3.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Power and Authority of the Committee</U></I>.
 The Compensation Committee is authorized to make all decisions as required in
 the administration of this Section 3 and to exercise its discretion to
 establish, amend, suspend, terminate, define, interpret, construe, apply,
 approve, withdraw and make any exceptions to the terms of the Plan it deems
 necessary or advisable for the proper administration of this Section 3 not
 inconsistent with the terms of this Plan or the EIC Plan. The Compensation
 Committee shall have the power and authority to grant Bonus Awards to
 Participants that are Senior Executives pursuant to the terms of the Plan. In
 discharging its responsibilities, the Committee may, to the extent
 reasonable, rely on information supplied by and recommendations of the
 Internal Committee and its individual members. In particular, the
 Compensation Committee shall have the authority:</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>2</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>
<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="84%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>a.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to select eligible Employees that qualify as Senior Executives to
 whom Bonus Awards may from time to time be granted hereunder;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>b.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to determine the Performance Period, the Performance Goals, and the
 criteria to determine Payout under the Bonus Award (including, but not
 limited to, the degree to which the Performance Goals are met and the base
 salary, other compensation or other factors by reference to which the Bonus
 Award is determined and is paid); </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>c.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to determine other terms and conditions, not inconsistent with the
 terms of the Plan, of any Bonus Award granted hereunder (including, but not
 limited to, any restriction on, forfeiture of, or repayment of any Bonus
 Award); and,</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>d.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to make any other determination and take any other action that the
 Compensation Committee deems necessary or desirable for the administration of
 this Section 3.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>3.3</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Further Provisions Regarding Participation
 and Bonus Awards</U></I>. The Compensation Committee
 shall determine the date as of which each eligible Senior Executive shall
 commence to participate in the Plan and the Bonus Award to which the Senior
 Executive is then eligible. Selection to be a Participant in this Plan with
 respect to any designated Performance Period does not guarantee that the
 Senior Executive will be selected to be a Participant in any other Bonus
 Award under this Plan, and the Compensation Committee shall not have any
 obligation for uniformity of treatment among eligible Employees.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>3.4</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Certification</U></I>.
 Following the end of each Performance Period and prior to payment of amounts
 earned under any Bonus Award to any Senior Executive, the Compensation
 Committee shall certify in writing as to the attainment of the Performance
 Goals upon which payments of amounts earned under any Bonus Award to Senior
 Executives is based.</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 4.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><U><B>Administration of the Plan for Bonus Awards to Company Employees. </B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>4.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Administration by the Internal Committee</U></I>.
 The Internal Committee shall administer the Plan for Bonus Awards to Company
 Employees pursuant to this Section 4, provided that the Internal Committee
 and its administration of the Plan under this Section 4 shall at all times be
 subject to the oversight, direction and control of the Compensation
 Committee. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>4.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Power and Authority of the Internal
 Committee</U></I>. The Internal Committee is authorized
 to make all decisions as required in the administration of this Section 4 and
 to exercise its discretion to interpret, construe, apply or make any
 exceptions to the terms of the Plan it deems necessary or advisable for the
 proper administration of this Section 4 not inconsistent with the terms of
 this Plan or guidelines approved or decisions made by the Compensation
 Committee. The Internal Committee shall have the power and authority to grant
 Bonus Awards to Company Employees, pursuant to the terms of the Plan. In
 particular, the Internal Committee shall have the authority:</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="84%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>a.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to select eligible Company Employees to whom Bonus Awards may from
 time to time be granted hereunder;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>b.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to determine the Performance Period, the Performance Goals, and the
 criteria to determine the amount due under the Bonus Award (including, but
 not limited to, the degree to which the Performance Goals are met, and the
 base salary, other compensation or other factors by reference to which the
 Bonus Award is determined and is paid); and</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>c.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>to determine the terms and conditions, not inconsistent with the
 terms of the Plan, of any Bonus Award granted hereunder (including, but not
 limited to, any restriction on, forfeiture of, or repayment of any Bonus Award).
 </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>4.3</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Further Provisions Regarding Participation</U></I>.
 The Internal Committee shall determine the date as of which each eligible
 Company Employee shall commence to participate in the Plan and the Bonus
 Award to which the Employee is then eligible. Selection as an eligible
 Company Employee to be a Participant in this Plan with respect to any
 designated Performance Period does not guarantee that the Company Employee
 will be selected to be a Participant in any other Bonus Award under this
 Plan, and the Internal Committee shall not have any obligation for uniformity
 of treatment among eligible Company Employees. </FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 5.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><U><B>Other Provisions Applicable to All Bonus Awards</B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="84%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.1</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Performance Period</U></I>.
 A Performance Period may be of any length not to exceed one year, and must be
 established prior to the start of such period or within the first ninety (90)
 days of such period (provided that, with respect to quarterly periods after
 the first fiscal quarter, the Performance Goals may not in any event be set
 after 25% or more of such period has elapsed). Performance Periods may run
 concurrently and may contain interim dates during the Performance Period on
 which the achievement of Performance Goals may be determined and Payouts may
 be made. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.2</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Form of Bonus Awards</U></I>. Each Bonus Award granted will specify
 Performance Goals established by the Compensation Committee or the Internal
 Committee, as the case may be, for the applicable Performance Period with
 respect to &#147;Threshold,&#148; &#147;Target,&#148; and &#147;Maximum&#148; levels of future performance
 by the Company or the business unit to which the Participant is
 assigned: </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>a.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;Threshold&#148; levels of performance shall represent a minimum level of
 actual performance in relation to Performance Goals below which no Payout
 will be earned by a Participant.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>b.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>&#147;Target levels&#148; of performance shall represent the level of actual
 performance in relation to the Performance Goals that must be achieved in
 order for a Participant to receive the Payout designated in the Bonus Award
 Agreement as being payable to the Participant if &#147;Target&#148; performance by the
 Company or business unit is achieved.</FONT></P>
 </TD>
 </TR>
 </TABLE>


<P ALIGN=CENTER><FONT SIZE=2>4</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P ALIGN=JUSTIFY>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P ALIGN=JUSTIFY>&nbsp;</P>
 </TD>
 <TD WIDTH="84%" VALIGN=TOP>
 <P ALIGN=JUSTIFY>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>c.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>Maximum levels of performance shall represent the level of actual
 performance in relation to the Performance Goals which must be achieved in order for a Participant to receive the Payout designated in the
 Participation Agreement as being the maximum payable to the Participant if
 &#147;Maximum&#148; performance by the Company or business unit is achieved or
 exceeded.</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Modifications to Performance Goals</U></I>.
 Except to the extent limited by this Plan, the EIC Plan or applicable law,
 the Compensation Committee shall have the discretion to adjust the
 determinations of the degree of attainment of the Performance Goals. In the
 event that the applicable tax and/or securities laws and regulatory rules and
 regulations change to permit Compensation Committee discretion to alter the
 Performance Goals without obtaining shareholder approval of such changes, the
 Compensation Committee shall have sole discretion to make such changes
 without obtaining shareholder approval. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.4</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Payouts Under Bonus Awards</U></I>. The amount of cash and (in the case of
 Senior Executives) Shares earned by and payable to Participants under Awards
 shall be determined following the end of the Performance Period applicable to
 the Bonus Award, and shall be based on actual achievement against the
 Performance Goals specified in the respective Bonus Award Agreement. With
 respect to (i) actual performance between Performance Goals applicable to
 Threshold Performance and Performance Goals applicable to Target Performance,
 and (ii) with respect to actual performance between Performance Goals
 applicable to Target Performance and Performance Goals applicable to Maximum
 Performance, the Participation Agreement shall provide a method for
 determining the amount of the Payout in cash and Shares. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.5</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Timing of Payouts</U></I>.
 Payouts of amounts earned under Bonus Awards will be made (whether in cash or
 shares) within 90 days of the end of the Performance Period or at such
 earlier date required in order to book expenses for fiscal year end tax and
 reporting purposes; provided that, with respect to Payouts of Bonus Awards
 for Senior Executives, the Compensation Committee must certify to the
 achievement of the Performance Goals prior to making Payouts to Senior
 Executives. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.6</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Compensation Committee Rule Making and
 Interpretations</U>. </I>The Compensation Committee shall have the authority to adopt, alter
 and repeal such administrative rules, guidelines and practices governing the
 Plan as it shall, from time to time, deem advisable; to interpret the terms
 and provisions of the Plan and any Bonus Award granted under the Plan (and
 any agreements relating thereto); and to otherwise supervise the
 administration of this Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.7</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Taxes</U></I>. In
 order to comply with all applicable federal or state income, social security,
 payroll, withholding or other tax laws or regulations, the Company may take
 such action, and may require a Participant to take such action, as it deems
 appropriate to ensure that all applicable federal or state income, social
 security, payroll, withholding or other taxes, which are the sole and
 absolute responsibility of the Participant, are withheld or collected from
 such Participant.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>5</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P ALIGN=CENTER>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.8</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Effect on Employment</U></I>.
 In the absence of any specific agreement to the contrary, no Bonus Award to a
 Participant under the Plan shall affect any right of the Company or any
 Subsidiary, to terminate, with or without cause, the Participant&#146;s employment
 with the Company or any Subsidiary at any time. Neither the establishment of
 the Plan, nor the granting of any Bonus Award hereunder, shall give any
 Participant (i)&nbsp;any rights to remain employed by the Company or any
 Subsidiary; (ii)&nbsp;any benefits not specifically provided for herein or in
 any Bonus Award granted hereunder; or (iii)&nbsp;any rights to prevent the
 Company or any Subsidiary from modifying, amending or terminating any of its
 other benefit plans of any nature whatsoever.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.9</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Nontransferability</U></I>.
 Except as otherwise determined by the Compensation Committee, no right under
 any Bonus Award shall be sold, assigned, transferred, pledged, hypothecated
 or otherwise disposed of during the time in which the requirement of
 continued employment or attainment of Performance Goals has not been achieved
 and prior to the date of actual Payout.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.10</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Impact of Restatement of Financial
 Statements</U></I>. If any of the Company&#146;s financial
 statements are required to be restated resulting from errors, omissions or
 fraud, the Compensation Committee may (in its sole discretion, but acting in
 good faith) direct that the Company recover all or a portion of any Bonus
 Award to any Participant with respect to any fiscal year of the Company the
 financial results of which are negatively affected by such restatement. The
 amount to be recovered from the Participant shall be the amount by which the
 amount earned under the Bonus Award exceeded the amount that would have been
 payable to the Participant had the financial statements been initially filed
 as restated, or any greater or lesser amount (including, but not limited to,
 the entire award) that the Compensation Committee shall determine. The
 Compensation Committee may limit the application of this Section 7.4 to those
 responsible for the misstatement or to some or all Senior Executives, but in
 no event shall the amount to be recovered by the Company be less than the
 amount required to be recovered as a matter of law. The Compensation
 Committee shall determine whether the Company shall effect any such recovery
 (a) by seeking repayment from the Participant, (b) by reducing (subject to
 applicable law and the terms and conditions of the applicable plan, program
 or arrangement) the amount that would otherwise be payable to the Participant
 under any compensatory plan, program or arrangement maintained by the Company
 or any of Subsidiary, (c) by withholding payment of future increases in
 compensation (including the payment of any discretionary bonus amount) or
 grants of compensatory awards that would otherwise have been made in
 accordance with the Company&#146;s otherwise applicable compensation practices, or
 (d) by any combination of the foregoing.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>5.11</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Forfeiture and Recoupment</U></I>.
 Without limiting in any way the generality of the Compensation Committee&#146;s power
 to specify any terms and conditions of a Bonus Award consistent with law, and
 for greater clarity, the Compensation Committee may specify that the
 Participant&#146;s rights, payments, and benefits with respect to a Bonus Award
 under this Plan shall be subject to reduction, cancellation, forfeiture, or
 recoupment upon the occurrence of certain specified events, in addition to
 any otherwise applicable vesting or performance conditions. Such events shall
 include, but shall not be limited to, termination of employment or services
 under certain or all circumstances, violation of material Company policies,
 breach of noncompetition, confidentiality, non-solicitation, noninterference,
 corporate property protection, or other agreement that may apply to the
 Participant, or other conduct by the Participant that the Compensation
 Committee determines is detrimental to the business or reputation of the
 Company and its subsidiaries.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>6</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>


<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 6.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Term; Amendment and Termination</B></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>6.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><I><U>Term of Plan</U></I>. The Plan shall continue in
 operation indefinitely, subject to the right of the Compensation Committee to
 terminate the Plan at any time. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>6.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><I><U>Amendments to and Termination of Plan</U></I>.
 Except to the extent prohibited by applicable law and unless otherwise
 expressly provided in the Plan or EIC Plan, the Compensation Committee may
 amend, alter, suspend, discontinue or terminate the Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>6.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><I><U>Correction of Defects, Omissions and Inconsistencies</U></I>.
 Except to the extent prohibited by applicable law and unless otherwise expressly
 provided in the Plan, the Compensation Committee may correct any defect,
 supply any omission or reconcile any inconsistency in the Plan or any Bonus
 Award in the manner and to the extent it shall deem desirable to carry the
 Plan into effect.</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Section 7.</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><U><B>Miscellaneous</B></U></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="92%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>7.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><I><U>Governing Law</U></I>. The Plan and all of the
 Participants&#146; rights thereunder shall be governed by and construed in
 accordance with the internal laws of the State of Minnesota.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>7.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><I><U>Severability</U></I>. If any provision of the
 Plan, or any Bonus Award is or becomes or is deemed to be invalid, illegal or
 unenforceable in any jurisdiction or would disqualify the Plan, or any Bonus
 Award under any law deemed applicable by the Compensation Committee, such
 provision shall be construed or deemed amended to conform to applicable laws,
 or if it cannot be so construed or deemed amended without, in the
 determination of the Compensation Committee, materially altering the purpose
 or intent of the Plan and the Bonus Award, such provision shall be stricken
 as to such jurisdiction, and the remainder of the Plan, any such Bonus Award
 shall remain in full force and effect.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>7.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="JUSTIFY"><FONT SIZE=2><I><U>No Trust or Fund Created</U></I>. Neither the
 Plan nor any obligations to pay amounts earned under a Bonus Award shall
 create or be construed to create a trust or separate fund of any kind or a
 fiduciary relationship between the Company or any Subsidiary and a
 Participant or any other person. To the extent that any person acquires a
 right to receive payments from the Company or any Subsidiary pursuant to a
 Bonus Award, such right shall be no greater than the right of any unsecured
 general creditor of the Company or of any Subsidiary.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>7</FONT></P>

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<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="8%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="84%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>7.4</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Nature of Payments</U></I>.
 Any and all cash payments pursuant to any Bonus Award granted hereunder shall
 constitute special incentive payments to the Participant, and, except to the
 extent that such plan or agreement expressly provides to the contrary, such
 payments shall not be taken into account in computing the amount of the
 Participant&#146;s salary or compensation for purposes of determining any pension,
 retirement, death or other benefits under:</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>a.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>any pension, retirement, profit sharing, bonus, life insurance or
 other employee benefit plan of the Company or any Subsidiary or</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>b.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2>any agreement between the Company (or any Subsidiary) and the
 Participant</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2>7.5</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P ALIGN=JUSTIFY><FONT SIZE=2><I><U>Headings</U></I>.
 Headings are given to the Sections of the Plan solely as a convenience to
 facilitate reference. Such headings shall not be deemed in any way material
 or relevant to the construction or interpretation of the Plan or any
 provision thereof.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>8</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>csi121044_ex99-2.htm
<DESCRIPTION>COMMUNICATIONS SYSTEMS, INC. LONG TERM INCENTIVE PLAN
<TEXT>

<HTML>
<HEAD><TITLE></TITLE></HEAD>
<BODY>

<P ALIGN=RIGHT><FONT SIZE=2><B>Exhibit 99.2</B></FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT SIZE=3><B>COMMUNICATIONS
SYSTEMS, INC.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>LONG
TERM INCENTIVE PLAN</B></FONT></P>

<BR><BR><BR>

<P ALIGN=CENTER><FONT SIZE=3><B>AS
AMENDED THROUGH MARCH 1, 2012</B></FONT></P>

<BR><BR><BR>

<P ALIGN=CENTER><FONT SIZE=2><B> (formerly named Performance Incentive Unit
Plan)</B></FONT></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>
<P ALIGN=CENTER><FONT SIZE=2><B>TABLE OF CONTENTS</B></FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="79%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP STYLE="BORDER-BOTTOM:SOLID BLACK 1PX">
 <P ALIGN=RIGHT><FONT SIZE=2><B>PAGE</B></FONT></P>


 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE I &#150;
 PURPOSE OF PLAN; APPLICATION TO PERFORMANCE PERIODS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>PURPOSE OF
 PLAN</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>APPLICATION
 TO PERFORMANCE PERIODS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>RELATION TO
 2011 EXECUTIVE INCENTIVE COMPENSATION PLAN</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE II -
 DEFINITIONS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>DEFINITIONS
 APPLICABLE TO THIS PLAN</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>OTHER
 DEFINITIONS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE III
 - TERM</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>TERM</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE IV -
 ADMINISTRATION</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>ADMINISTRATION</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE V -
 ELIGIBILITY AND GRANT OF INCENTIVE AWARDS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>ELIGIBILITY</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>GRANTS OF
 INCENTIVE AWARDS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>4</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>ADJUSTMENTS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>4</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.4</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>INCENTIVE
 PAYMENTS UNDER INCENTIVE AWARDS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>5</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.5</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>SUBSEQUENT
 GRANTS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>5</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE VI -
 BENEFITS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>5</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>PAYMENT TO
 THE PARTICIPANT</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>5</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>DESIGNATION
 OF BENEFICIARY</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>6</FONT></P>
 </TD>
 </TR>
<TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE VII
 - TERMS AND CONDITIONS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>6</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>PARTICIPATION
 AGREEMENTS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>6</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>FORFEITURE
 OF INCENTIVE AWARDS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>6</FONT></P>
 </TD>
 </TR>
<TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE VIII
 - CHANGES IN CAPITAL STRUCTURE</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>8.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>CAPITAL
 STRUCTURE CHANGES</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE IX -
 COMPANY SUCCESSORS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>9.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>IN GENERAL</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE X -
 AMENDMENT OR TERMINATION OF PLAN</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>AMENDMENTS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>TERMINATION</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE XI -
 CLAIMS PROCEDURE</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="79%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="3%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>11.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>CLAIMS
 PROCEDURE AND REVIEW</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>11.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>APPEAL</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>ARTICLE XII
 - MISCELLANEOUS PROVISIONS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.1</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>TITLE TO
 ASSETS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.2</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>ASSIGNMENT
 AND LEVY</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.3</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>PARTICIPANT&#146;S
 RIGHTS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.4</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>INCOMPETENCY</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>8</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.5</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>TAX
 WITHHOLDING</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.6</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>GOVERNMENT
 AND OTHER REGULATIONS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.7</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>INDEMNIFICATION</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.8</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>NOTICES</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.9</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>SEVERABILITY</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.10</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>RELEASE</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.11</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>GOVERNING LAW</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.12</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>ARBITRATION</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>10</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.13</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>RELATIONSHIP TO OTHER BENEFITS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>10</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.14</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>EXPENSES</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>10</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.15</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>TITLES AND HEADINGS</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>10</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.16</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT  SIZE=2>PRIOR AGREEMENTS; CONTROLLING DOCUMENT</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2>10</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>
<P ALIGN=CENTER><FONT SIZE=2><B>COMMUNICATIONS SYSTEMS, INC.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>LONG TERM INCENTIVE PLAN</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>EFFECTIVE AS OF JANUARY 1, 2012</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE I&#150; PURPOSE OF PLAN; APPLICATION TO
PERFORMANCE PERIODS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PURPOSE
OF PLAN. The purpose of the Communications Systems, Inc. Long Term Incentive
Plan (formerly named the &#147;Performance Incentive Unit Plan&#148;) is to provide
competitive long term compensation opportunities to enable the Company to
attract and retain qualified executive talent, and to reward key employees for
achieving goals and improving Company performance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;APPLICATION
TO PERFORMANCE PERIODS. The Plan was originally effective January 1, 2004 and
has been amended from time to time. The application of the Plan to Performance
Periods adopted under the Plan is as follows: </FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Plan as amended effective January 1, 2008 applies to Performance Periods
 ending on or before December 31, 2009.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Plan as amended and restated as of January 1, 2010 applies to the 2010 to
 2013 Performance Period.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Plan as amended as of January 1, 2012 applies to Performance Periods
 beginning January 1, 2012. </FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RELATION
TO 2011 EXECUTIVE INCENTIVE COMPENSATION PLAN. Effective January 1, 2012 this
is a sub-plan to the Company&#146;s 2011 Executive Incentive Compensation Plan (the
&#147;EIC Plan). Unless otherwise expressly provided herein, all provisions of the
EIC Plan, to the extent relevant to the terms of this Plan, shall be applicable
to and are hereby incorporated by reference into this plan.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE II - DEFINITIONS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFINITIONS
APPLICABLE TO THIS PLAN.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INCENTIVE
 PAYMENT means the amount payable from the Plan to a Participant under Article
 VI, whether in cash or Stock.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CHANGE
 IN CONTROL means a transaction or series of transactions occurring after the
 Effective Date in which either of the following events occurs: </FONT></P>
 </TD>
 </TR>
</TABLE>

<P ALIGN="CENTER"><FONT SIZE="2">1 </FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="90%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
 any person or entity is or becomes, directly or indirectly, the beneficial
 owner of 50% or more of the combined voting power of the Company&#146;s then
 outstanding voting securities, or</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;at
 least 50% of the Company&#146;s assets are transferred to any unrelated person or
 persons.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>For purposes
 of this Section 2.4, (i) &#147;beneficial ownership&#148; or &#147;voting power&#148; over shares
 of stock includes any such ownership or control, as applicable, through any
 contract, arrangement, or understanding, directly or indirectly, and (ii) the
 determination of outstanding shares of stock shall be made as of the
 Effective Date, giving effect to any future adjustments as may be required by
 Section 8.1(a) of this Plan.</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FISCAL
 YEAR means a calendar year.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INCENTIVE
 AWARD means a grant of Performance Stock Units or Performance Cash Units, or
 both, pursuant to Article V of this Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INTERNAL
 COMPENSATION COMMITTEE means individuals appointed by the Compensation
 Committee of the Board of Directors and charged with administration of the
 Plan under the direction of the Committee. The Internal Compensation
 Committee shall be comprised of Company executives, including the Chief
 Executive Officer, Chief Financial Officer and Vice President, Human
 Resources. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PARTICIPANT
 means anyone from among a select group of officers and key employees of the
 Company and its business units who have decision-making authority that has a
 significant impact on the long term financial results of the Company as a
 whole or one of its business units and who is selected by the Committee to
 receive an Incentive Award. Employees in grades 21 and above are eligible to
 participate in the Plan, although other employees may be allowed to
 participate at the discretion of the Committee. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PARTICIPATION
 AGREEMENT means any certificate or agreement substantially in conformity with
 the terms of Section 7.1.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PERFORMANCE
 GOALS means one or more objective or subjective measures pre-established by
 the Committee and selected from the Performance Goals in the EIC Plan and,
 subject to any minimum or maximum limits, the achievement of which, in whole
 or in part, will result in the Participant earning or becoming vested in an
 Incentive Award under this Plan in whole or in part.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PERFORMANCE
 CASH UNIT means an Incentive Award granted to a Participant to receive cash
 (within a specified range) upon achievement in whole or in part of
 Performance Goals or a level of performance with respect to one or more Performance
 Goals over a specified Performance Period that is paid either at the end of
 the Performance Period or at a later time.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P ALIGN="CENTER"><FONT SIZE="2">2</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PERFORMANCE
 PERIOD means a designated period of two or more calendar years. Effective as
 of January 1, 2010, Incentive Awards shall be granted for the four year Performance
 Period commencing January 1, 2010 and ending December 31, 2013. Effective
 January 1, 2012, Performance Periods shall cover a three year period
 beginning with the Performance Period commencing January 1, 2012. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp;PERFORMANCE
 STOCK UNIT means an Incentive Award granted to a Participant to receive
 Shares (within a specified range) upon achievement in whole or in part of
 Performance Criteria or a level of performance with respect to one or more
 Performance Criteria over a specified Performance Period that are deliverable
 either at the end of the Performance Period or at a later time.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PLAN
 means this Communications Systems, Inc. Long Term Incentive Plan (formerly
 Performance Unit Incentive Plan), a non-qualified deferred compensation plan
 covering a select group of officers and key management employees of the
 Company and its business units that is a sub-plan of the EIC Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;STOCK
 means the common stock of the Company. </FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER
DEFINITIONS. The terms &#147;Board,&#148; &#147;Cause,&#148; &#147;Committee,&#148; &#147;Company,&#148; &#147;Disability,&#148;
and &#147;Retirement&#148; shall have the meanings assigned to such terms in the EIC
Plan.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE III- TERM</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TERM.
This Plan shall continue at the discretion of the Board or as otherwise
provided in Article X.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE IV- ADMINISTRATION</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADMINISTRATION.
This Plan shall be administered by the Committee provided that certain aspects
of administration of this Plan may be delegated to the Internal Compensation
Committee, which shall at all times be subject to direction and oversight by
the Committee. All questions of interpretation and application of this Plan, or
of the terms and conditions pursuant to which Incentive Awards are granted or
forfeited or pursuant to which amounts are paid under the provisions hereof,
shall be subject to the determination of the Committee. Such determination
shall be final and binding upon all parties affected thereby.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE V- ELIGIBILITY AND GRANT OF INCENTIVE
AWARDS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ELIGIBILITY.
Employees must be designated as a Participant by the
Committee in order to be eligible for Incentive Awards for any Performance
Period. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE="2">3</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GRANTS
OF INCENTIVE AWARDS. Participants selected by the
Committee shall be granted Incentive Awards as Performance Stock Units or
Performance Cash Units, or both, based on their responsibilities expressed as a
percentage of their base salary and, in the case of Performance Stock Units,
the number of shares shall be determined by reference to the price per share of
the Company&#146;s common stock as of the date of grant or as of an average price
for the Company&#146;s shares during a period of trading days beginning no more than
20 business days before and ending no more than 20 days after the date of
grant. Each Incentive Award granted will be linked to Performance Goals
established by the Committee for the applicable Performance Period with respect
to &#147;threshold,&#148; &#147;target,&#148; and &#147;maximum&#148; levels of future performance by the
Company or the business unit to which the Participant is assigned: </FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Threshold
 levels of performance shall represent the actual performance over a
 Performance Period in relation to Performance Goals below which no Incentive
 Payment will be earned by a Participant.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Target
 levels of performance shall represent the actual performance over a
 Performance Period in relation to the Performance Goals that must be achieved
 in order for a Participant to receive the amount of cash or Stock, or both,
 designated in the Participation Agreement as being payable to the Participant
 if &#147;Target&#148; performance by the Company or business unit is achieved.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maximum
 levels of performance shall represent the actual performance over a
 Performance Period in relation to the Performance Goals which must be
 achieved in order for a Participant to receive the amount of cash or Stock,
 or both, designated in the Participation Agreement as being payable to the
 Participant if &#147;Maximum&#148; performance by the Company or business unit is
 achieved or exceeded. </FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2>Performance
Goals may based on: (i) return on assets, (ii) cumulative revenues, or, (iii)
any other Performance Goals or combination of Performance Goals that may be
selected by the Committee from time to time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may determine Minimum, Target and Maximum levels of performance that
cover an entire Performance Period or for specific Fiscal Years within a
Performance Period, and Performance Goals may vary by classification of
Participants as determined by the Committee. The maximum number of shares of
Stock that may be paid to a Participant pursuant to a Performance Stock Grant
shall be reserved under the EIC Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADJUSTMENTS.
Participants who are promoted or who are transferred within or between business
units shall have their Incentive Awards adjusted for the Performance Period in
a manner determined by the Committee. The Committee may modify the Performance
Goals for any Performance Period or any Fiscal Year within a Performance Period
during the operation of the Plan to reflect a change in the Company&#146;s operation
or structure as determined by the Committee, and the Committee&#146;s determination
as to what modifications shall be made, and the extent thereof, shall be
conclusive. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE="2">4</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=3><P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INCENTIVE
PAYMENTS UNDER INCENTIVE AWARDS. Incentive Payments earned by and payable to Participants under Incentive
Awards shall be determined following the end of the Performance Period for
which the Performance Stock and Performance Units were granted, and shall be
based on actual achievement against the Performance Goals specified in the
respective Participation Agreements. With respect to (i) actual performance
between Performance Goals applicable to Threshold Performance and Performance
Goals applicable to Target Performance and (ii) with respect to actual
performance between Performance Goals applicable to Target Performance and
Performance Goals applicable to Maximum Performance, the Participation
Agreement shall provide a method for determining what level of cash and what
amount of Stock shall be paid.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUBSEQUENT
GRANTS. The Board may authorize the Committee to grant additional Incentive
Awards hereunder to Participants or other employees to reward them for
performance.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE VI- BENEFITS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PAYMENT
TO THE PARTICIPANT.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="96%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EVENTS
 OF PAYMENT. A Participant shall be entitled to a payment from the Plan upon
 the occurrence of the Participant&#146;s (i) Retirement; (ii) death; (iii)
 Disability; (iv) upon a Change in Control; or (v) upon conclusion of a
 Performance Period. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AMOUNT
 OF PAYMENT. Other than with respect to an event of payment described in
 clauses (i) (ii) (iii) or (iv) under Section 6.1(a), the Company shall pay
 the Participant, or his or her designated beneficiary, as applicable, the
 Incentive Award earned under the Participation Agreement based on Company or
 business unit performance over the relevant Performance Period. If the event
 of payment is other than the conclusion of the Performance Period, the
 Participant&#146;s benefit shall be equitably prorated based on the period between
 the commencement of Performance Period and such event, or, in the Committee&#146;s
 discretion, a longer period not to exceed the conclusion of the Fiscal Year
 in which such event of payment occurred. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EQUITABLE
 ADJUSTMENT. In the event a Participant is terminated by the Company not for
 Cause and in circumstances other than as described in Section 6.1(a), the Committee
 may, but shall be under no obligation to, authorize a payment of such amount
 as it determines, but not to exceed the payment that would have been
 permitted if termination was due to an event of payment described in clauses
 (i) (ii) (iii) or (iv) under Section 6.1(a); provided, however, payment shall
 not be accelerated or modified in violation of Section 409A of the Internal
 Revenue Code. Further, if a Participant&#146;s responsibilities are materially
 increased during a Performance Period, the Committee may, but shall be under
 no obligation to, increase the Incentive Payment that may be potentially
 earned under an Incentive Award.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P ALIGN="CENTER"><FONT SIZE="2">5</FONT></P>

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<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="96%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TIMING
 AND METHOD OF PAYMENT. Incentive Awards shall be paid within 2 &frac12; months
 following the occurrence of the earliest event of payment under Section
 6.1(a), as determined by the Committee with applicable withholding for such
 payments. However, if the Participant is a key employee, as defined in
 Section 416(i) of the Internal Revenue Code, then distribution shall not be
 made before a date which is six months after the date of the Participant&#146;s
 separation from service (or, if earlier, the date of death of the
 Participant), and this limitation shall be effective so long as the stock of
 the Company remains publicly traded on an established securities market or
 otherwise.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFERRAL
 OF PAYMENT. The Plan shall not permit a deferral of distributions.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SURVIVOR
 BENEFIT. If the Participant dies before receiving the Incentive Payment
 provided under a Participation Agreement, then the Incentive Payment shall be
 payable to the Participant&#146;s beneficiary as designated under Section 6.3, and
 shall be paid, in accordance with Sections 6.1(c), (d) or (e), as applicable.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DESIGNATION
OF BENEFICIARY. Each Participant shall file with the Committee, on the
Participation Agreement or other form prescribed by the Company, a written
designation of the person or persons to receive Incentive Payments under this
Plan. This right shall include the right to name and change primary and
contingent beneficiaries, but any designation of beneficiaries shall be
effective only when filed by the Participant in writing with the Committee
during the Participant&#146;s lifetime. In the absence of such written designation
or if the beneficiary so named by the deceased Participant dies before him or
her, the following shall be considered the designated beneficiary, in order of
priority:</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Participant&#146;s spouse, if surviving, with unpaid amounts at the spouse&#146;s death
 payable to the spouse&#146;s estate or as otherwise designated by the spouse;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Participant&#146;s surviving children and surviving issue of deceased children,
 such issue of deceased children taking by right of representation, equally; or</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Participant&#146;s estate.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>ARTICLE VII- TERMS AND CONDITIONS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PARTICIPATION
AGREEMENTS. Incentive Awards shall be evidenced by a Participation Agreement,
which shall state the type of Incentive Award (whether Performance Cash Units,
Performance Stock Units, or Other Award) granted to the Participant, the
Performance Goals for Threshold, Target and Maximum levels of performance
against which actual performance will be measured in order to determine the
Incentive Payment, if any, to which the Participant is entitled, and shall
incorporate by reference the terms of this Plan.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FORFEITURE
OF INCENTIVE AWARDS A Participant who (i) is terminated for Cause, or (ii) who
terminates employment with the Company before the conclusion of a Performance
Period, for reasons other than Retirement, Disability or death, shall forfeit
all Incentive Awards granted for that Performance Period.</FONT></P>


<P ALIGN="CENTER"><FONT SIZE="2">6</FONT></P>

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<P ALIGN=CENTER><FONT SIZE=2>ARTICLE VIII- CHANGES IN CAPITAL STRUCTURE</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL
STRUCTURE CHANGES</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
 the outstanding shares of the Company&#146;s stock as a whole are increased,
 decreased, or changed into, or exchanged for, a different number or kind of
 securities of the Company, whether through merger, consolidation, reorganization,
 recapitalization, reclassification, stock dividend, stock split, combination
 of shares, exchange of shares, change in corporate structure, or the like, an
 appropriate and proportionate adjustment shall be made. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
 the event of a change in the stock which is limited to a change in the
 designation thereof without increase or decrease in the number of issued
 shares, the shares resulting from any such change shall be deemed to be stock
 within the meaning of this Plan.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments
 under this Section shall be made by the Committee, whose determination as to
 what adjustment shall be made, and the extent thereof, shall be conclusive. </FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>ARTICLE IX- COMPANY SUCCESSORS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
GENERAL. If the Company shall be the surviving or resulting entity in any
merger, sale of assets or sale of stock, consolidation, or corporate
reorganization (including a reorganization in which the holders of stock
receive securities of another entity), the Committee shall make such
appropriate determinations and adjustments as it deems necessary so as to
substantially preserve the rights and benefits of Participants under this Plan.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE X- AMENDMENT OR TERMINATION OF PLAN</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1&nbsp;&nbsp;&nbsp;&nbsp;AMENDMENTS.
The Company reserves the right to amend or modify, in whole or in part, any or
all of the provisions of this Plan at any time by a written instrument;
provided, however, that no amendment or modification shall be made which will
deprive any Participant or any Participant&#146;s beneficiary of any benefit to
which he or she is entitled under the Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2&nbsp;&nbsp;&nbsp;&nbsp;TERMINATION.
Continuation of the Plan is not assumed as a contractual obligation of the
Company and the right is reserved by the Company to at any time suspend or
discontinue the Plan. However, no such suspension or discontinuance shall
deprive any Participant or beneficiary of any benefit to which he or she is
entitled under the Plan.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE="2">7</FONT></P>

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<P ALIGN=CENTER><FONT SIZE=2>ARTICLE XI- CLAIMS PROCEDURE</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CLAIMS
PROCEDURE AND REVIEW. A Participant or beneficiary may make a claim for Plan
benefits within the time and in the manner described herein. Such claim shall
be made within 60 days after the claim arises by filing a written request with
the Committee. The claim shall be reviewed by the Committee within a reasonable
time after the receipt of the written claim. Notice of the Committee&#146;s decision
shall be communicated to the claimant in writing. If the claim is denied, the
notice shall include the specific reasons for the denial (including reference
to pertinent Plan provisions), a description of any additional material or
information necessary for the Committee to reconsider the claim, the reasons
for any of such additional material or information, and an explanation of the
review procedure.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;APPEAL.
The claimant or his or her duly authorized representative may, within 90 days
after receiving such written notice, request the Board to review the
Committee&#146;s decision. The Board shall afford the claimant a hearing and the
opportunity to review all pertinent documents and submit issues and comments
orally and in writing and shall render a review decision in writing within 120
days after receipt of request for review. The review proceeding shall be
conducted in accordance with the rules and regulations adopted from time to
time by the Board.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>ARTICLE XII- MISCELLANEOUS PROVISIONS</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TITLE
TO ASSETS. No Participant or former Participant shall have any legal or
equitable right or interest in any of the funds set aside by the Company or in
any assets in which the Company may invest, from time to time, to fund this
Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSIGNMENT
AND LEVY. The Plan is for the benefit and protection of the Participants and
their beneficiaries and the rights, privileges and benefits herein conferred
shall not, to the extent permitted by law, be subject to alienation,
assignment, pledge, levy, attachment, garnishment or other legal process or in
any manner anticipated, encumbered, committed, withdrawn or surrendered, and neither
shall the same be subject or liable in any way for debts, contracts, or
agreements or other claims of creditors of such Participants or their
beneficiaries whether such claims are now contracted or which may hereafter be
contracted or incurred.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PARTICIPANT&#146;S
RIGHTS. The establishment of this Plan shall not create any legal or equitable
right against the Company unless such right is specifically provided for in
this Plan. Furthermore, nothing in this Plan shall be construed as giving a
Participant the right to be retained in the employment of the Company, and a
Participant shall remain subject to discharge at any time to the same extent as
if this Plan had not been adopted.</FONT></P>



<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INCOMPETENCY.
Every person receiving or claiming Incentive Payments under this Plan shall be
conclusively presumed to be mentally competent until the date on which the
Committee receives a written notice in a form and manner acceptable to the
Committee that such person is incompetent and that a guardian, conservator or
other person vested with the care of his or her estate has been appointed. In
such event, the Committee may direct payments of Incentive
Payments to such guardian, conservator or other person vested with the care of
his or her estate and any such payments so made shall be a complete discharge
of the Committee and the Company to the extent so made.</FONT></P>


<P ALIGN="CENTER"><FONT SIZE="2">8</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TAX
WITHHOLDING. The Company shall have the right to deduct from all Incentive
Payments any federal, state, local, or employment taxes which it deems are
required by law to be withheld with respect to such Incentive Payments. At the
request of a Participant, or as required by law, such sums as may be required
for the payment of any estimated or accrued income tax liability may be
withheld and paid over to the governmental entity entitled to receive the same.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GOVERNMENT
AND OTHER REGULATIONS. The obligation of the Company to make payment of
Incentive Payments shall be subject to all applicable laws, rules, and
regulations and to such approvals by any government agencies as may be deemed
necessary or appropriate by the Committee.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INDEMNIFICATION.
Each person who is or who at any time serves as a member of the Committee or
the Internal Compensation Committee shall be indemnified and held harmless by
the Company against and from (i) any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit, or proceeding to which such person may
be a party or in which such person may be involved by reason of any action or
failure to act under this Plan; and (ii) any and all amounts paid by such
person in satisfaction of judgment in any such action, suit, or proceeding
relating to the Plan. Each person covered by this indemnification shall give
the Company an opportunity, at its own expense, to handle and defend the same
before such person undertakes to handle and defend the same on such person&#146;s
own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the charter or bylaws of the Company, as a matter of law, or otherwise, or any
power that the Company may have to indemnify such person or hold such person
harmless.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTICES.
Notices required by this Plan to be given to the Company, the Committee or a
Participant shall be in writing and shall be considered to have been duly given
or served if personally delivered, or sent by first class, certified or
registered mail.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEVERABILITY.
The invalidity or partial invalidity of any portion of this Plan shall not
invalidate the remainder thereof, and said remainder shall remain in full force
and effect.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.10&nbsp;&nbsp;&nbsp;RELEASE.
Any payment to or for the benefit of any Participant or his or her
beneficiaries in accordance with the provisions hereof shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Company.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.11&nbsp;&nbsp;&nbsp;GOVERNING
LAW. All matters relating to this Plan or to Incentive Payments granted
hereunder shall be governed by the laws of the State of Minnesota, without
regard to the principles of
conflict of laws thereof, except to the extent preempted by the laws of the
United States.</FONT></P>


<P ALIGN="CENTER"><FONT SIZE="2">9</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.12&nbsp;&nbsp;ARBITRATION.
All disputes and claims relating to any provision hereof shall be settled by
submission for arbitration at the Minneapolis, Minnesota office of the American
Arbitration Association, under the then current rules of the American
Arbitration Association. The award and decision of the arbitrator shall be
conclusive and binding upon all parties and judgment upon the award may be
entered in any court of competent jurisdiction. The parties acknowledge and
agree that any arbitration award may be enforced against them in any court of
competent jurisdiction and each waives any right to contest the validity of
such award.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.13&nbsp;&nbsp;RELATIONSHIP TO OTHER BENEFITS. No Incentive Payment under this
Plan shall be taken into account in determining any benefits under the group
life insurance plan, or long or short term disability plan of the Company, but
shall be considered as compensation when paid under the Company&#146;s Section
401(k) plan and employee stock ownership plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.14&nbsp;&nbsp;EXPENSES. The expenses of implementing and administering this
Plan shall be borne by the Company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.15&nbsp;&nbsp;TITLES AND HEADINGS. The titles and headings of the Articles and
Sections in this Plan are for convenience of reference only, and in the event
of any conflict, the text of this Plan, rather than such titles or headings,
shall control.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.16&nbsp;&nbsp;PRIOR AGREEMENTS; CONTROLLING DOCUMENT. This Plan shall replace
and supersede any and all prior agreements relating to the Plan and
participation in the future equity growth of the Company. Subject to the terms
of the EIC Plan, this Plan shall otherwise constitute the controlling document
with respect to all Plan matters.</FONT></P>

<P></P>

<P>&nbsp;</P>

<P>&nbsp;</P>


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