--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Exhibit 10.12

SELECT COMFORT CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
(As Amended through February 2005)

1.  Purpose.
 
The purpose of this 1999 Employee Stock Purchase Plan (the “Plan”) is to advance
the interests of Select Comfort Corporation (the "Company”) and its shareholders
by allowing eligible employees of the Company and its Participating Subsidiaries
to use payroll deductions to acquire shares of the Company’s Common Stock on
favorable terms. The Company intends that the Plan qualify as an “employee stock
purchase plan” under Section 423 of the Code. Accordingly, provisions of the
Plan will be construed so as to extend and limit participation in a manner
consistent with the requirements of Section 423 of the Code.
 
2.  Definitions.
 
2.1  “Board” means the Board of Directors of the Company.
 
2.2  “Change in Control” means an event described in Section 9.1 of the Plan.
 
2.3  “Code” means the Internal Revenue Code of 1986, as amended.
 
2.4  “Committee” means the group of individuals administering the Plan, as
provided in Section 3 of the Plan.
 
2.5  “Common Stock” means the common stock, par value $0.01 per share, of the
Company, or the number and kind of shares of stock or other securities into
which such common stock may be changed in accordance with Section 4.3 of the
Plan.
 
2.6  “Compensation” means all gross cash compensation (including wage, salary,
incentive, bonus and overtime earnings) paid by the Company or any Participating
Subsidiary to a Participant, including amounts that would have constituted
compensation but for a Participant’s election to defer or reduce compensation
pursuant to any deferred compensation, cafeteria, capital accumulation or any
other similar plan of the Company; provided, however, that the Committee, in its
sole discretion, may expand or limit the amounts that will be deemed
compensation for purposes of the Plan in such manner as it deems appropriate.
 
2.7  “Eligible Employee” means any employee of the Company or a Participating
Subsidiary (other than an employee whose customary employment with the Company
or a Participating Subsidiary is for five months or less per calendar year) who,
with respect to any Offering Period, is employed by the Company or a
Participating Subsidiary prior to the Offering Commencement Date for such
Offering Period.
 
2.8  “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
 
A-1

--------------------------------------------------------------------------------

 
 
2.9  “Fair Market Value” means, with respect to the Common Stock, as of any date
(or, if no shares were traded or quoted on such date, as of the next preceding
date on which there was such a trade or quote) (a) the mean between the reported
high and low sale prices of the Common Stock if the Common Stock is listed,
admitted to unlisted trading privileges or reported on any foreign or national
securities exchange or on the Nasdaq National Market or an equivalent foreign
market on which sale prices are reported; (b) if the Common Stock is not so
listed, admitted to unlisted trading privileges or reported, the closing bid
price as reported by the Nasdaq SmallCap Market, OTC Bulletin Board, National
Quotation Bureau, Inc. or other comparable service; or (c) if the Common Stock
is not so listed or reported, such price as the Committee determines in good
faith in the exercise of its reasonable discretion.
 
2.10  “Offering Commencement Date” means the first day of an Offering Period.
 
2.11  “Offering Period” means any of the offerings to Participants of Options
under the Plan, each continuing for three months, as described in Section 6 of
the Plan.
 
2.12  “Offering Termination Date” means the last day of an Offering Period.
 
2.13  “Option” means a right to purchase shares of Common Stock granted to a
Participant in connection with an Offering Period pursuant to Section 7 of the
Plan
 
2.14  “Option Price” means, with respect to any Offering Period through the
Offering Period commencing as of April 1, 2005, eighty-five percent (85%) of the
Fair Market Value of one share of Common Stock on the Offering Termination Date,
and with respect to any Offering Period commencing on or after July 1, 2005,
ninety-five percent (95%) of the Fair Market Value of one share of Common Stock
on the Offering Termination Date.
 
2.15  “Participant” means an Eligible Employee who elects to participate in the
Plan pursuant to Section 5 of the Plan.
 
2.16  “Participating Subsidiary” means a Subsidiary that has been designated by
the Committee from time to time, in its sole discretion, as a corporation whose
Eligible Employees may participate in the Plan.
 
2.17  “Securities Act” means the Securities Act of 1933, as amended.
 
2.18  “Subsidiary” means any subsidiary corporation of the Company within the
meaning of Section 424(f) of the Code.
 
2.19  “Termination of Employment” means a Participant’s complete termination of
employment with the Company and all Participating Subsidiaries for any reason,
including without limitation death, disability or retirement. In the event that
a Participant is in the employ of a Participating Subsidiary and the
Participating Subsidiary ceases to be a Participating Subsidiary of the Company
for any reason, such event will be deemed a termination of employment unless the
Participant continues in the employ of the Company or another Participating
Subsidiary.
 
 
A-2

--------------------------------------------------------------------------------

 
 
3.  Administration.
 
The Plan will be administered by the Board or by a committee of the Board. So
long as the Company has a class of its equity securities registered under
Section 12 of the Exchange Act, any committee administering the Plan will
consist solely of two or more members of the Board who are “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act. Such a
committee, if established, will act by majority approval of the members (at a
meeting in person or by telephone conference or by written consent), and a
majority of the members of such a committee will constitute a quorum. As used in
the Plan, “Committee” will refer to the Board or to such a committee, if
established. To the extent consistent with corporate law, the Committee may
delegate to any officers of the Company the duties, power and authority of the
Committee under the Plan pursuant to such conditions or limitations as the
Committee may establish; provided, however, that only the Committee may exercise
such duties, power and authority with respect to Participants who are subject to
Section 16 of the Exchange Act. The Committee may exercise its duties, power and
authority under the Plan in its sole discretion without the consent of any
Participant or other party, unless the Plan specifically provides otherwise.
Each determination, interpretation or other action made or taken by the
Committee pursuant to the provisions of the Plan will be final, conclusive and
binding for all purposes and on all persons, including, without limitation, the
Company, the shareholders of the Company, the participants and their respective
successors-in-interest. No member of the Committee will be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under the Plan.

4.  Shares Available for Issuance; Adjustments for Certain Events.
 
4.1  Maximum Number of Shares Available. Subject to adjustment as provided in
Section 4.3 of the Plan, the maximum number of shares of Common Stock available
for issuance under the Plan will be 1,500,000 shares of Common Stock. If the
total number of shares of Common Stock that would otherwise be issuable upon the
exercise of Options granted pursuant to Section 7 of the Plan on any Offering
Termination Date exceeds the number of shares then available for issuance under
the Plan, the Committee will make a pro rata allocation of the shares of Common
Stock remaining available for issuance under the Plan in as uniform and
equitable a manner as it deems appropriate.
 
4.2  Accounting for Options. Shares of Common Stock that are issued under the
Plan or that are subject to outstanding Options will be applied to reduce the
maximum number of shares of Common Stock remaining available for issuance under
the Plan. Any shares of Common Stock that are subject to an Option that is
terminated unexercised will automatically again become available for issuance
under the Plan.
 
4.3  Adjustments to Shares and Options. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other change in the
corporate structure or shares of the Company, the Committee (or, if the Company
is not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) will make appropriate adjustment (which
determination will be
 
 
A-3

--------------------------------------------------------------------------------

 
 
conclusive) as to the number and kind of securities or other property (including
cash) available for issuance or payment under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants, the number and kind of
securities or other property (including cash) subject to, and the exercise price
of, outstanding Options.
 
5.  Participation; Payroll Deductions.
 
5.1  Participation. Participation in the Plan is voluntary and is not a
condition of employment. Eligible Employees may elect to participate in the
Plan, beginning with the first Offering Period to commence after such person
becomes an Eligible Employee, by properly completing an enrollment form in the
form provided by the Company and filing the enrollment form with the Company's
Human Resources Department not later than the 15th day of the month immediately
preceding the Offering Commencement Date of the first Offering Period in which
the Participant wishes to participate (or on such later date prior to the first
Offering Period after adoption of the Plan as may be reasonably necessary to
enable Eligible Employees to participate in such first Offering Period). An
Eligible Employee who elects to participate with respect to an Offering Period
will be deemed to have elected to participate in each subsequent Offering
Period, unless such Participant properly withdraws from participation on a
timely basis. An Eligible Employee may withdraw from participation as to any
subsequent Offering Period by properly completing a notice of withdrawal in the
form provided by the Company and filing the notice of withdrawal with the
Company's Human Resources Department not later than 4:30 p.m., Minneapolis,
Minnesota time on the 15th day of the last month of an Offering Period. Any such
notice of withdrawal will be effective for the next Offering Period commencing
after the Offering Period in which such notice of withdrawal is given, all as
further described in Section 8.1 of the Plan.
 
5.2  Limitation on Participation. Notwithstanding any provisions of the Plan to
the contrary, an Eligible Employee may not participate in the Plan and will not
be granted an Option under the Plan if, immediately after the grant of such
Option, such Eligible Employee (or any other person whose stock ownership would
be attributed to such Eligible Employee pursuant to Section 424(d) of the Code)
would own stock or options possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of its “parent” or
“subsidiary” corporations (within the meaning of Section 424 of the Code).
 
5.3  Payroll Deductions.
 
(a)  By completing and filing an enrollment form, a Participant will elect to
have payroll deductions made from such Participant’s total Compensation in whole
percentages from a minimum of 1% to a maximum of 15%, (or such other minimum or
maximum percentages as the Committee may from time to time establish).
 
(b)  All payroll deductions authorized by a Participant will be credited as of
each payday to an account established under the Plan for the Participant. Such
account will be solely for bookkeeping purposes, no separate fund, trust or
other segregation of such amounts will be established or made and the amounts
represented by such account will be held as part of the Company's general
assets, usable for any corporate purpose. A
 
 
A-4

--------------------------------------------------------------------------------

 
 
Participant may not make any separate cash payment or contribution to such
Participant’s account. No interest will accrue on amounts held in such accounts
under the Plan.
 
(c)  No increases or decreases in the amount of payroll deductions for a
Participant may be made during an Offering Period. A Participant may increase or
decrease the amount of his or her payroll deductions under the Plan for
subsequent Offering Periods by properly completing an amended enrollment form
and filing it with the Company's Human Resources Department not later than the
15th day of the month immediately preceding the Offering Commencement Date of
the Offering Period for which such change in payroll deductions is to be
effective.
 
(d)  A Participant may withdraw from participation in the Plan as provided in
Section 8.1 of the Plan.
 
6.  Offering Periods.
 
Options to purchase shares of Common Stock will be offered to Participants under
the Plan through a continuous series of Offering Periods, each continuing for
three months, and each of which will commence on January 1, April 1, July 1 and
October 1 of each year, as the case may be, and will terminate on March 31, June
30, September 30 and December 31 of such year, as the case may be.
 
7.  Options.
 
7.1  Grant of Options. With respect to any Offering Period, each Participant
participating in such Offering Period will be granted, by operation of the Plan
on the Offering Commencement Date for such Offering Period, an Option to
purchase (at the Option Price) as many shares (including fractional shares) of
Common Stock as such Participant will be able to purchase with the accumulated
payroll deductions credited to such Participant’s account during such Offering
Period plus the balance (if any) carried forward from the Participant’s payroll
deduction account from the preceding Offering Period.
 
7.2  Limitations on Purchase. Notwithstanding Section 7.1 or any other provision
of the Plan to the contrary, the number of shares of Common Stock that may be
purchased under the Plan will be limited as follows:
 
(a)  No Participant may purchase more than 2,000 shares of Common Stock under
the Plan in any given Offering Period.
 
(b)  No Participant may be granted an Option that permits such Participant’s
right to purchase Common Stock under the Plan and any other “employee stock
purchase plans” (within the meaning of Section 423 of the Code) of the Company
and its Subsidiaries to accrue (i.e., become exercisable) at a rate that exceeds
$25,000 of Fair Market Value of Common Stock (determined at the time such Option
is granted) for each calendar year in which such Option is outstanding at any
time.
 
7.3  Exercise of Options.
 
 
A-5

--------------------------------------------------------------------------------

 
 
(a)  Unless a Participant withdraws from the Plan as provided in Section 8.1 of
the Plan, the Participant's Option for the purchase of shares of Common Stock
granted with respect to an Offering Period will be exercised automatically at
the Offering Termination Date of such Offering Period for the purchase of the
number of shares (including fractional shares) of Common Stock that the
accumulated payroll deductions in such Participant’s account as of such Offering
Termination Date will purchase at the applicable Option Price.
 
(b)  No Participant (or any person claiming through such Participant) will have
any interest in any Common Stock subject to an Option under the Plan until such
Option has been exercised, at which point such interest will be limited to the
interest of a purchaser of the Common Stock purchased upon such exercise pending
the delivery of such Common Stock.
 
(c)  Shares of Common Stock acquired by each Participant shall be held in a
general securities brokerage account maintained for the benefit of all
Participants with a registered securities broker/dealer selected by the Company
(the “Agent”). The Agent shall maintain individual subaccounts for each
Participant in such general account to which shall be allocated such
Participant’s shares of Common Stock. The Committee, in its discretion, may
direct the Agent to issue and deliver to any Participant a certificate or
certificates for the whole number of shares of Common Stock held in such
Participant's subaccount at any time ninety (90) days or more after the
Participant ceases to be an Eligible Employee, which certificates shall be
registered in the name of the Participant or in the form directed by the
Participant. No certificates for fractional shares will be issued. Instead,
Participants will receive a cash distribution representing any fractional
shares.
 
(d)  Cash dividends with respect to a Participant's shares of Common Stock held
in the general securities brokerage account maintained by the Agent shall
automatically be reinvested in additional shares of Common Stock. The purchase
price of any shares (“Reinvestment Shares”) purchased through the reinvestment
of dividends shall be the Fair Market Value of a share on the date such dividend
is paid. There shall be allocated to each Participant’s individual subaccount
such Participant’s Reinvestment Shares purchased with the dividend funds
credited to such Participant.
 
(e)  Each Participant shall be entitled to vote all shares held for the benefit
of such Participant in the general securities brokerage account maintained by
the Agent.
 
8.  Withdrawal From Plan.
 
8.1  Voluntary Withdrawal.
 
(a)  A Participant may, at any time on or before 4:30 p.m., Minneapolis,
Minnesota time on the 15th day of the last month of an Offering Period,
terminate his or her participation in the Plan and withdraw all, but not less
than all, of the payroll deductions credited during the applicable Offering
Period to such Participant’s account under the Plan by giving written notice of
withdrawal to the Company’s Human Resources Department. Such notice shall be
substantially in the form of the notice of
 
 
A-6

--------------------------------------------------------------------------------

 
 
withdrawal provided by the Company and must state that the Participant wishes to
terminate his or her participation in the Plan and request the withdrawal of all
of the Participant's payroll deductions credited during the applicable Offering
Period to such Participant’s account under the Plan. Following the receipt by
the Company of a timely notice of withdrawal, (a) all of the payroll deductions
credited during the applicable Offering Period to such Participant's account
under the Plan will be paid to such Participant as soon as practicable after
receipt of the notice of withdrawal; (b) such Participant’s Option for such
Offering Period will automatically be canceled and will no longer be
exercisable; and (c) payroll deductions under the Plan will cease as soon as
practicable after receipt of the notice of withdrawal and until such time, if
any, that a valid and timely enrollment form is subsequently filed by such
Participant.
 
(b)  A Participant's voluntary withdrawal pursuant to this Section 8.1 will not
have any effect upon such Participant’s eligibility to participate in a
subsequent Offering Period (so long as such Participant completes and files a
new enrollment form pursuant to Section 5 of the Plan) or in any similar plan
that may hereafter be adopted by the Company.
 
8.2  Termination of Employment.
 
(a)  Upon the Termination of Employment of a Participant at any time, (a) all of
the payroll deductions credited during the current Offering Period to such
Participant's account under the Plan will be paid to such Participant (or, in
the case of death, to the person or persons entitled thereto under Sections 10
and 11.3 of the Plan) as soon as practicable after the effective date of the
Termination of Employment; (b) such Participant’s Option for such Offering
Period will automatically be canceled and will no longer be exercisable; and (c)
payroll deductions under the Plan will cease as soon as practicable after the
effective date of the Termination of Employment.
 
(b)  Unless the Committee otherwise determines in its sole discretion, a
Participant's employment will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the Company
or the Participating Subsidiary for which the Participant provides employment,
as determined by the Committee in its sole discretion based upon such records.
 
9.  Change in Control.
 
9.1  Change in Control. For purposes of this Section 9, a “Change in Control” of
the Company will mean the following:
 
(a)  the sale, lease, exchange or other transfer, directly or indirectly, of
substantially all of the assets of the Company (in one transaction or in a
series of related transactions) to any Person (as defined below);
 
(b)  the approval by the shareholders of the Company of any plan or proposal for
the liquidation or dissolution of the Company;
 
 
A-7

--------------------------------------------------------------------------------

 
 
(c)  any Person, other than a Bona Fide Underwriter (as defined below), becomes
after the effective date of the Plan the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of (i) 20% or more, but
not more than 50%, of the combined voting power of the Company’s outstanding
securities ordinarily having the right to vote at elections of directors, unless
the transaction resulting in such ownership has been approved in advance by the
Continuity Directors (as defined below), or (ii) more than 50% of the combined
voting power of the Company’s outstanding securities ordinarily having the right
to vote at elections of directors (regardless of any approval by the Continuity
Directors);
 
(d)  a merger or consolidation to which the Company is a party if the
shareholders of the Company immediately prior to the effective time of such
merger or consolidation have, solely on account of ownership of securities of
the Company at such time, “beneficial ownership” (as defined in Rule 13d-3 under
the Exchange Act), immediately following the effective time of such merger or
consolidation, of securities of the surviving corporation representing (i) 50%
or more, but not more than 80%, of the combined voting power of the surviving
corporation’s then outstanding securities ordinarily having the right to vote at
elections of directors, unless such merger or consolidation has been approved in
advance by the Continuity Directors, or (ii) less than 50% of the combined
voting power of the surviving corporation’s then outstanding securities
ordinarily having the right to vote at elections of directors (regardless of any
approval by the Continuity Directors); or
 
(e)  the Continuity Directors cease for any reason to constitute at least a
majority of the Board.
 
9.2  Change in Control Definitions. For purposes of this Section 9:
 
(a)  “Continuity Director” means any individual who was a member of the Board on
the effective date of the Plan, while he or she is a member of the Board, and
any individual who subsequently becomes a member of the Board whose election, or
nomination for election by the Company’s shareholders, was approved by a vote of
at least a majority of the directors who are Continuity Directors (either by a
specific vote or by approval of the proxy statement of the Company in which such
individual is named as a nominee for director without objection to such
nomination). For example, assuming that seven individuals comprise the entire
Board as of the effective date of the Plan, if a majority of such individuals
approved a proxy statement in which two different individuals were nominated to
replace two of the individuals who were members of the Board as of the effective
date of the Plan, these two newly elected directors would join the remaining
five directors who were members of the Board as of the effective date of the
Plan as Continuity Directors. Similarly, if subsequently a majority of these
directors approved a proxy statement in which three different individuals were
nominated to replace three other directors who were members of the Board as of
the effective date of the Plan, these three newly elected directors would also
become, along with the other four directors, Continuity Directors. Individuals
subsequently joining the Board could become Continuity Directors under the
principles reflected in this example.
 
 
A-8

--------------------------------------------------------------------------------

 
 
(b)  “Bona Fide Underwriter” means a Person engaged in business as an
underwriter of securities that acquires securities of the Company from the
Company through such Person’s participation in good faith in a firm commitment
underwriting until the expiration of 40 days after the date of such acquisition.
 
(c)  “Person” means any individual, corporation, partnership, group, association
or other “person,” as such term is used in Section 13(d) or Section 14(d) of the
Exchange Act, other than the Company, any affiliate or any benefit plan
sponsored by the Company or any affiliate. For this purpose, an affiliate is (i)
any corporation at least a majority of whose outstanding securities ordinarily
having the right to vote at elections of directors is owned directly or
indirectly by the Company or (ii) any other form of business entity in which the
Company, by virtue of a direct or indirect ownership interest, has the right to
elect a majority of the members of such entity’s governing body.
 
9.3  Adjustment of Offering Period. Without limiting the authority of the
Committee under Sections 3, 4.3 and 13 of the Plan, if a Change in Control of
the Company occurs, the Committee, in its sole discretion, may (a) accelerate
the Offering Termination Date of the then current Offering Period and provide
for the exercise of Options thereunder by Participants in accordance with
Section 7.3 of the Plan, or (b) accelerate the Offering Termination Date of the
then current Offering Period and provide that all payroll deductions credited to
the accounts of Participants will be paid to Participants as soon as practicable
after such Offering Termination Date and that all Options for such Offering
Period will automatically be canceled and will no longer be exercisable.
 
10.  Designation of Beneficiary.
 
A Participant may file with the Company’s Human Resources Department a written
designation of a beneficiary who is to receive shares of Common Stock and cash,
if any, under the Plan in the event of such Participant's death prior to
delivery of such shares or cash to such Participant. The Participant may change
such designation of beneficiary at any time by written notice to the Company’s
Human Resources Department. In the event of the death of a Participant in the
absence of a valid designation of a beneficiary who is living at the time of
such Participant's death, (a) the Company will deliver such shares of Common
Stock and cash to the executor or administrator of the estate of the
Participant, or (b) if to the Company’s knowledge no such executor or
administrator has been appointed, the Company, in its sole discretion, may
deliver such shares of Common Stock and cash to the spouse or to any one or more
dependents or relatives of the Participant or, if no spouse, dependent or
relative is known to the Company, to such other person as the Company may
designate.
 
11.  Rights of Eligible Employees and Participants; Transferability.
 
11.1  No Right to Employment. Nothing in the Plan will interfere with or limit
in any way the right of the Company or any Participating Subsidiary to terminate
the employment of any Eligible Employee or Participant at any time, nor confer
upon any Eligible Employee or Participant any right to continue in the employ of
the Company or any Participating Subsidiary.
 
 
A-9

--------------------------------------------------------------------------------

 
 
11.2  Rights as a Shareholder. As a holder of an Option under the Plan, a
Participant will have no rights as a shareholder unless and until such Option is
exercised and the Participant becomes the holder of record of shares of Common
Stock. Except as otherwise provided in the Plan, no adjustment will be made for
dividends or distributions with respect to Options as to which there is a record
date preceding the date the Participant becomes the holder of record of such
shares, except as the Committee may determine in its sole discretion.
 
11.3  Restrictions on Transfer. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an Option or
to receive shares of Common Stock under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution, or as provided in Section 10 of the Plan) by the
Participant. Any such attempt at assignment, transfer, pledge or other
disposition will be without effect, except that the Company may treat such act
as an election to withdraw from the Plan in accordance with Section 8.1 of the
Plan. During his or her lifetime, a Participant's Option to purchase shares of
Common Stock under the Plan is exercisable only by such Participant.
 
12.  Securities Law and Other Restrictions.
 
Notwithstanding any other provision of the Plan or any agreements entered into
pursuant to the Plan, the Company will not be required to issue any shares of
Common Stock under the Plan, and a Participant may not sell, assign, transfer or
otherwise dispose of shares of Common Stock issued pursuant to Options granted
under the Plan, unless (a) there is in effect with respect to such shares a
registration statement under the Securities Act and any applicable state or
foreign securities laws or an exemption from such registration under the
Securities Act and applicable state or foreign securities laws, and (b) there
has been obtained any other consent, approval or permit from any other
regulatory body that the Committee, in its sole discretion, deems necessary or
advisable. The Company may condition such issuance, sale or transfer upon the
receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of Common Stock, as
may be deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.
 
13.  Amendment or Termination.
 
The Board may suspend or terminate the Plan or any portion thereof at any time,
and may amend the Plan from time to time in such respects as the Board may deem
advisable in order that Options under the Plan will conform to any change in
applicable laws or regulations or in any other respect the Board may deem to be
in the best interests of the Company; provided, however, that no amendments to
the Plan will be effective without approval of the shareholders of the Company
if shareholder approval of the amendment is then required pursuant to Section
423 of the Code or the rules of any stock exchange or Nasdaq or similar
regulatory body. Upon termination of the Plan, the Committee, in its sole
discretion, may take any of the actions described in Section 9.3 of the Plan.
 
14.  Effective Date of Plan.
 
The Plan will be effective as of June 10, 1999, the date it was adopted by the
Board. The Plan will terminate at midnight on December 31, 2020 and may be
terminated prior to such time
 
 
A-10

--------------------------------------------------------------------------------

 
 
by Board action, and no Option will be granted after such termination. The Plan
has been adopted by the Board subject to shareholder approval.
 
15.  Miscellaneous.
 
15.1  Governing Law. The validity, construction, interpretation, administration
and effect of the Plan and any rules, regulations and actions relating to the
Plan will be governed by and construed exclusively in accordance with the laws
of the State of Minnesota, notwithstanding the conflicts of laws principles of
any jurisdictions.
 
15.2  Successors and Assigns. The Plan will be binding upon and inure to the
benefit of the successors and permitted assigns of the Company and the
Participants.
 
15.3  Withholding. Delivery of shares of Common Stock or of cash pursuant to the
Plan shall be subject to any required withholding taxes. A person entitled to
receive shares of Common Stock may, as a condition precedent to receiving such
shares, be required to pay the Company a cash amount equal to the amount of any
required withholdings.
 
 
A-11

--------------------------------------------------------------------------------