Exhibit 10.4

RESHAPE LIFESCIENCES INC.
2017 EMPLOYMENT INDUCEMENT INCENTIVE AWARD PLAN

Adopted: September 28, 2017

Section 1.

Purpose.

The purpose of the Plan is to aid in attracting and retaining Eligible Persons
capable of assuring the future success of the Company, to offer such Eligible
Persons incentives to put forth maximum efforts for the success of the Company’s
business and to afford such Eligible Persons an opportunity to acquire a
proprietary interest in the Company.

Section 2.

Definitions.

As used in the Plan, the following terms shall have the meanings set forth
below:

(a)  “Affiliate” shall mean (i) any entity that, directly or indirectly through
one or more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, in each case as determined
by the Committee.

(b)  “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Performance Award, Dividend Equivalent, Other Stock Grant
or Other Stock-Based Award granted under the Plan.

(c)  “Award Agreement” shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.

(d)  “Board” shall mean the Board of Directors of the Company.

(e)  “Change in Control” shall mean the consummation of any of the following:

(i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act who did not own shares of the capital stock of the Company on the
date of grant of the Award shall, together with his, her or its Affiliates and
Associates (as such terms are defined in Rule 12b-2 promulgated under the
Exchange Act), become the “Beneficial Owner” (as such term is defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power of the
Company’s then outstanding securities (any such person being hereinafter
referred to as an “Acquiring Person”);

(ii) the Continuing Directors cease to constitute a majority of the Company’s
Board;

(iii) There should occur (A) any consolidation or merger involving the Company
and the Company shall not be the continuing or surviving corporation or the
shares of the Company’s capital stock shall be converted into cash, securities
or other

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property; provided, however, that this subclause (A) shall not apply to a merger
or consolidation in which (1) the Company is the surviving corporation and (2)
the stockholders of the Company immediately prior to the transaction have the
same proportionate ownership of the capital stock of the surviving corporation
immediately after the transaction; (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company; or (C) any liquidation or
dissolution of the Company;

(iv) The majority of the Continuing Directors determine, in their sole and
absolute discretion, that there has been a Change in Control; or

(v) No Award Agreement shall provide for accelerated exercisability of any Award
or the lapse of restrictions relating to any Award in connection with a change
in control event other than a Change in Control as defined herein.

(f)  “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any regulations promulgated thereunder.

(g)  “Committee” shall mean either the Board or a committee of the Board
appointed by the Board to administer the Plan, which shall consist solely of two
or more Independent Directors each of whom is intended to qualify as a
“non-employee director” as defined by Rule 16b-3 of the Exchange Act.

(h)  “Company” shall mean ReShape Lifesciences Inc., a Delaware corporation, and
any successor corporation.

(i)  “Continuing Director” shall mean any person who is a member of the Board of
Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person, an Affiliate or Associate of an
Acquiring Person or a representative of an Acquiring Person or of any such
Affiliate or Associate and who (i) was a member of the Company’s Board of
Directors on the date of grant of the Option or (ii) subsequently became a
member of the Board of Directors, upon the nomination or recommendation, or with
the approval of, a majority of the Continuing Directors.

(j)  “Director” shall mean a member of the Board.

(k)  “Dividend Equivalent” shall mean any right granted under Section 6(e) of
the Plan.

(l)  “Eligible Person”  shall mean any prospective employee who is commencing
employment with the Company or an Affiliate, or is being rehired following a
bona fide period of non-employment by the Company or an Affiliate, if he or she
is granted an Award in connection with his or her commencement of employment
with the Company or an Affiliate and such grant is an inducement material to his
or her entering into employment with the Company or an Affiliate (within the
meaning of NASDAQ Stock Market Rule IM-5636-1 or any successor rule, if the
Company’s securities are traded on the NASDAQ Stock Market, and/or the
applicable requirements of any other established stock exchange on which the
Company’s securities are traded, as applicable, as such rules and requirements
may be amended from time to time).  Notwithstanding the foregoing, if the
Company’s securities are traded on the NASDAQ Stock

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Market, an “Eligible Person” shall not include any prospective employee who has
previously been an  employee or Director of the Company unless following a bona
fide period of non-employment by the Company or an Affiliate.  The Committee may
in its discretion adopt procedures from time to time to ensure that a
prospective employee is eligible to participate in the Plan prior to the
granting of any Awards to such individual under the Plan (including without
limitation a requirement that each such prospective employee certify to the
Company prior to the receipt of an Award under the Plan that he or she has had a
bona fide period of non-employment, and that the grant of Awards under the Plan
is an inducement material to his or her agreement to enter into employment with
the Company or an Affiliate).

(m)  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(n)  “Fair Market Value” shall mean, with respect to any property (including,
without limitation, any Shares or other securities), the fair market value of
such property determined by such methods or procedures as shall be established
from time to time by the Committee. Notwithstanding the foregoing, unless
otherwise determined by the Committee, the Fair Market Value of Shares on a
given date for purposes of the Plan shall not be less than (i) the closing price
as reported for composite transactions, if the Shares are then listed on a
national securities exchange, (ii) the last sale price, if the Shares are then
quoted on the NASDAQ Stock Market or (iii) the average of the closing
representative bid and asked prices of the Shares in all other cases, on the
date as of which fair market value is being determined. If on a given date the
Shares are not traded in an established securities market, the Committee shall
make a good faith attempt to satisfy the requirements of this clause and in
connection therewith shall take such action as it deems necessary or advisable.

(o)  “Incentive Stock Option” shall mean an option granted under Section 6(a) of
the Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision.

(p) “Independent Director” shall mean a Director of the Company who is not an
Employee of the Company and who qualifies as “independent” within the meaning of
NASDAQ Stock Market Rule 5605(a)(2), or any successor rule, if the Company’s
securities are traded on the NASDAQ Stock Market, and/or the applicable
requirements of any other established stock exchange on which the Company’s
securities are traded, as applicable, as such rules and requirements may be
amended from time to time.

(q) “Non-Qualified Stock Option” shall mean an option granted under Section 6(a)
of the Plan that is not intended to be an Incentive Stock Option.

(r)  “Option” shall mean a Non-Qualified Stock Option.

(s)  “Other Stock Grant” shall mean any right granted under Section 6(f) of the
Plan.

(t)  “Other Stock-Based Award” shall mean any right granted under Section 6(g)
of the Plan.

(u)  “Participant” shall mean an Eligible Person designated to be granted an
Award under the Plan.

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(v)  “Performance Award” shall mean any right granted under Section 6(d) of the
Plan.

(w)  “Person” shall mean any individual or entity, including a corporation,
partnership, limited liability company, association, joint venture or trust.

(x)  “Plan” shall mean the ReShape Lifesciences Inc. 2017 Employment Inducement
Incentive Award Plan, as amended from time to time.

(y)  “Restricted Stock” shall mean any Shares granted under Section 6(c) of the
Plan.

(z)  “Restricted Stock Unit” shall mean any unit granted under Section 6(c) of
the Plan evidencing the right to receive a Share (or a cash payment equal to the
Fair Market Value of a Share) at some future date.

(aa) “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act or any successor rule or regulation.

(bb) “Section 409A” shall mean Section 409A of the Code, or any successor
provision and the applicable Treasury Regulations and other applicable guidance
thereunder.

(cc)  “Securities Act” shall mean the Securities Act of 1933, as amended.

(dd)  “Share” or “Shares” shall mean shares of Common Stock, $0.01 par value, of
the Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.

(ee)  “Specified Employee” shall mean a specified employee as defined in Section
409A(a)(2)(B) of the Code or applicable proposed or final regulations under
Section 409A, determined in accordance with procedures established by the
Company and applied uniformly with respect to all plans maintained by the
Company that are subject to Section 409A.

(ff)  “Stock Appreciation Right” shall mean any right granted under Section 6(b)
of the Plan.

Section 3.

Administration.

(a)  Power and Authority of the Committee. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan and to applicable law,
the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts

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payable with respect to an Award under the Plan shall be deferred either
automatically or at the election of the holder thereof or the Committee; (viii)
interpret and administer the Plan and any instrument or agreement relating to,
or Award made under, the Plan; (ix) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; (x) adopt procedures from time to time
intended to ensure that an individual is an Eligible Person prior to the
granting of any Awards to such individual under the Plan (including without
limitation a requirement, if any, that each such individual certify to the
Company prior to the receipt of an Award under the Plan that he or she has not
been previously employed, has had a bona fide period of non-employment, and that
the grant of Awards under the Plan is an inducement material to his or her
agreement to enter into employment with the Company or an Affiliate);  and (xi)
make any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon any Participant, any holder
or beneficiary of any Award.

(b)  Delegation. The Committee may delegate its powers and duties under the Plan
to one or more officers or Directors of the Company or any Affiliate or a
committee of such officers or Directors, subject to such terms, conditions and
limitations as the Committee may establish in its sole discretion; provided,
however, that the Committee shall not delegate such authority in such a manner
as would contravene Section 157 of the Delaware General Corporation
Law. Notwithstanding anything to the contrary provided herein (a) Awards shall
be approved by (i) the Committee, comprised of a majority of the Company’s
Independent Directors or (b) a majority of the Company’s Independent Directors
and (y) the authority to grant Awards shall not be delegated under any
circumstances.

Section 4.

Shares Available for Awards.

(a)  Shares Available. Subject to adjustment as provided in Section 4(c), the
aggregate number of Shares that may be issued under all Awards under the Plan
from its inception shall be 1,500,000.

(b)  Counting Shares. For purposes of this Section 4, except as set forth in
this Section 4(b) below, if an Award entitles the holder thereof to receive or
purchase Shares, the number of Shares covered by such Award or to which such
Award relates shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards under the Plan.

(i)  Shares Added Back to Reserve. Subject to the limitations in (ii) below, if
any Shares covered by an Award or to which an Award relates are not purchased or
are forfeited or are reacquired by the Company, or if an Award otherwise
terminates or is cancelled without delivery of any Shares, then the number of
Shares counted against the aggregate number of Shares available under the Plan
with respect to such Award, to the extent of any such forfeiture, reacquisition
by the Company, termination or cancellation, shall again be available for
granting Awards under the Plan.

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(ii)  Shares Not Added Back to Reserve. Notwithstanding anything to the contrary
in (i) above, the following Shares will not again become available for issuance
under the Plan: (A) any Shares which would have been issued upon any exercise of
an Option but for the fact that the exercise price was paid by a “net exercise”
pursuant to the terms of the Option Agreement or any Shares tendered in payment
of the exercise price of an Option; (B) any Shares withheld by the Company or
Shares tendered to satisfy any tax withholding obligation with respect to any
Award; (C) Shares covered by a stock-settled Stock Appreciation Right issued
under the Plan that are not issued in connection with settlement in Shares upon
exercise; or (D) Shares that are repurchased by the Company using Option
exercise proceeds.

(iii)  Cash-Only Awards. Awards that do not entitle the holder thereof to
receive or purchase Shares shall not be counted against the aggregate number of
Shares available for Awards under the Plan.

(iv)  Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is necessary in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Shares (or other securities or other property)
that thereafter may be made the subject of Awards, (ii) the number and type of
Shares (or other securities or other property) subject to outstanding Awards and
(iii) the purchase or exercise price with respect to any Award; provided,
however, that the number of Shares covered by any Award or to which such Award
relates shall always be a whole number.

Section 5.

Eligibility.

Any Eligible Person of the Company or any Affiliate, shall be eligible to be
designated as a Participant. In determining which Eligible Persons shall receive
an Award and the terms of any Award, the Committee may take into account the
nature of the services rendered by the respective Eligible Persons, their
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant.

Section 6.

Awards.

(a)  Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

(i)  Exercise Price. The purchase price per Share purchasable under an Option
shall be determined by the Committee and shall not be less than 100% of the Fair
Market Value of a Share on the date of grant of such Option.

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(ii)  Option Term. The term of each Option shall be fixed by the Committee.

(iii)  Time and Method of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part and the method or
methods by which, and the form or forms (including, without limitation, cash,
Shares, other securities, other Awards or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the applicable
exercise price) in which, payment of the exercise price with respect thereto may
be made or deemed to have been made. Alternatively, the Committee may, in its
discretion, permit a Non-Qualified Stock Option to be exercised by delivering to
the Participant a number of Shares having an aggregate Fair Market Value
(determined as of the date of exercise) equal to the excess, if positive, of the
Fair Market Value of the Shares underlying the Non-Qualified Stock Option being
exercised, on the date of exercise, over the exercise price of the Non-Qualified
Stock Option for such Shares.

(b)  Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
over (ii) the grant price of the Stock Appreciation Right as specified by the
Committee, which price shall not be less than 100% of the Fair Market Value of
one Share on the date of grant of the Stock Appreciation Right. Subject to the
terms of the Plan and any applicable Award Agreement, the grant price, term,
methods of exercise, dates of exercise, methods of settlement and any other
terms and conditions of any Stock Appreciation Right shall be as determined by
the Committee (except that the term of each Stock Appreciation Right shall be
subject to the same limitation in Section 6(a)(ii) applicable to Options). The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.

(c)  Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Restricted Stock and Restricted Stock Units to Participants
with the following terms and conditions and with such additional terms and
conditions not inconsistent with the provisions of the Plan as the Committee
shall determine:

(i)  Restrictions. Shares of Restricted Stock and Restricted Stock Units shall
be subject to such restrictions as the Committee may impose (including, without
limitation, a waiver by the Participant of the right to vote or to receive any
dividend or other right or property with respect thereto), which restrictions
may lapse separately or in combination at such time or times, in such
installments or otherwise as the Committee may deem appropriate.

(ii)  Issuance and Delivery of Shares. Any Restricted Stock granted under the
Plan shall be issued at the time such Awards are granted and may be evidenced in
such manner as the Committee may deem appropriate, including book-entry
registration or issuance of a stock certificate or certificates, which
certificate or certificates shall be held by the Company or held in nominee name
by the stock transfer agent or brokerage service selected by the Company to
provide such services for the Plan. Such certificate or

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certificates shall be registered in the name of the Participant and shall bear
an appropriate legend referring to the restrictions applicable to such
Restricted Stock. Shares representing Restricted Stock that are no longer
subject to restrictions shall be delivered (including by updating the book-entry
registration) to the Participant promptly after the applicable restrictions
lapse or are waived. In the case of Restricted Stock Units, no Shares shall be
issued at the time such Awards are granted. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units
evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holder of the Restricted Stock Units.

(iii)  Forfeiture. Except as otherwise determined by the Committee or as
provided in an Award Agreement, upon termination of employment or service (as
determined under criteria established by the Committee) during the applicable
restriction period, all Shares of Restricted Stock and all Restricted Stock
Units at such time subject to restriction shall be forfeited and reacquired by
the Company at the original purchase price; provided, however, that the
Committee may, when it finds that a waiver would be in the best interest of the
Company, waive in whole or in part Units. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units
evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holders of the Restricted Stock Units.

(d)  Performance Awards. The Committee is hereby authorized to grant Performance
Awards to Participants subject to the terms of the Plan and any applicable Award
Agreement. A Performance Award granted under the Plan (i) may be denominated or
payable in cash, Shares (including, without limitation, Restricted Stock and
Restricted Stock Units), other securities, other Awards or other property and
(ii) shall confer on the holder thereof the right to receive payments, in whole
or in part, upon the achievement of such performance goals during such
performance periods as the Committee shall establish. Subject to the terms of
the Plan and any applicable Award Agreement, the performance goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee.

(e)  Dividend Equivalents. The Committee is hereby authorized to grant Dividend
Equivalents to Participants, subject to the terms of the Plan and any applicable
Award Agreement, under which such Participants shall be entitled to receive
payments (in cash, Shares, other securities, other Awards or other property as
determined in the discretion of the Committee) equivalent to the amount of cash
dividends paid by the Company to holders of Shares with respect to a number of
Shares determined by the Committee. Notwithstanding the foregoing, (i) the
Committee may not grant Dividend Equivalents to Eligible Persons in connection
with grants of Options or Stock Appreciation Rights to such Eligible Persons,
and (ii) no Dividend Equivalent payments shall be made to a Participant with
respect to any Award prior to the date on which all conditions or restrictions
relating to such Award (or portion thereof to which the Dividend Equivalent
relates) have been satisfied, waived or lapsed.

(f)  Stock Awards. The Committee is hereby authorized, subject to the terms of
the Plan and any applicable Award Agreement, to grant to Participants Shares
without restrictions thereon as are deemed by the Committee to be consistent
with the purpose of the Plan.

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(g)  Other Stock-Based Awards. The Committee is hereby authorized to grant to
Participants subject to the terms of the Plan and any applicable Award
Agreement, such other 

Awards that are denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Committee
to be consistent with the purpose of the Plan. No Award issued under this
Section 6(g) shall contain a purchase right or an option-like exercise feature.

(h)  General.

(i)  No Cash Consideration for Awards. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.

(ii)  Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted under
any plan of the Company or any Affiliate other than the Plan. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem with
awards granted under any such other plan of the Company or any Affiliate may be
granted either at the same time as or at a different time from the grant of such
other Awards or awards.

(iii)  Forms of Payment under Awards. Subject to the terms of the Plan and of
any applicable Award Agreement, payments or transfers to be made by the Company
or an Affiliate upon the grant, exercise or payment of an Award may be made in
such form or forms as the Committee shall determine (including, without
limitation, cash, Shares, other securities, other Awards or other property or
any combination thereof), and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents with respect to installment or deferred payments.

(iv)  Limits on Transfer of Awards. Except as provided by the Committee or by
this Plan, any Award (other than any fully vested and unrestricted Shares issued
pursuant to any Award) and any right under any such Award shall not be
transferable by a Participant other than by will or by the laws of descent and
distribution or by transfer of an Award back to the Company. The Committee may
establish procedures as it deems appropriate for a Participant to designate a
Person or Persons, as beneficiary or beneficiaries, to exercise the rights of
the Participant and receive any property distributable with respect to any Award
in the event of the Participant’s death. The Committee, in its discretion and
subject to such additional terms and conditions as it determines, may permit a
Participant to transfer a Non-Qualified Stock Option to any “family member” (as
defined in the General Instructions to Form S-8 (or any successor to such
Instructions or such Form) under the Securities Act) at any time that such
Participant holds such Option, provided that such transfers may not be for
“value” (as defined in the General Instructions to Form S-8 (or any successor to
such Instructions or such Form) under the Securities Act) and the family member
may not make any subsequent transfers other than by will or by the laws of

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descent and distribution. Each Award under the Plan or right under any such
Award shall be exercisable during the Participant’s lifetime only by the
Participant (except as provided herein or in an Award Agreement or amendment
thereto relating to a Non-Qualified Stock Option) or, if permissible under
applicable law, by the Participant’s guardian or legal representative. No Award
(other than any fully vested and unrestricted Shares issued pursuant to any
Award) or right under any such Award may be pledged, alienated, attached or
otherwise encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the Company or any
Affiliate.

(v)  Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee.

(vi)  Restrictions; Securities Exchange Listing. All Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such restrictions as the Committee may deem advisable under the Plan,
and to any applicable federal or state securities laws and regulatory
requirements. The Committee may cause appropriate entries to be made or legends
to be affixed to reflect such restrictions. If the Shares or other securities
are listed on a securities exchange, the Company shall not be required to
deliver any Shares or other securities covered by an Award until such Shares or
other securities have been listed on such securities exchange.

(vii)  Section 409A Provisions. Notwithstanding anything in the Plan or any
Award Agreement to the contrary, to the extent that any amount or benefit that
constitutes “deferred compensation” to a Participant under Section 409A and
applicable guidance thereunder is otherwise payable or distributable to a
Participant under the Plan or any Award Agreement solely by reason of the
occurrence of a Change in Control or due to the Participant’s disability or
“separation from service” (as defined under Section 409A), such amount or
benefit will not be payable or distributable to the Participant by reason of
such circumstance unless the Committee determines in good faith that (i) the
circumstances giving rise to such Change in Control, disability or separation
from service meet the definition of a change in ownership or control, disability
or separation from service, as the case may be, in Section 409A(a)(2)(A) of the
Code and applicable proposed or final regulations, or (ii) the payment or
distribution of such amount or benefit would be exempt from the application of
Section 409A by reason of the short-term deferral exemption or otherwise. Any
payment or distribution that otherwise would be made to a Participant who is a
Specified Employee (as determined by the Committee in good faith) on account of
separation from service may not be made before the date which is six months
after the date of the Specified Employee’s separation from service (or if
earlier, upon the Specified Employee’s death) unless the payment or distribution
is exempt from the application of Section 409A by reason of the short-term
deferral exemption or otherwise.

Section 7.

Amendment and Termination; Adjustments.

Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan:

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(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or
terminate the Plan; provided, however, that, notwithstanding any other provision
of the Plan or any Award Agreement, without the approval of the stockholders of
the Company, no such amendment, alteration, suspension, discontinuation or
termination shall be made that, absent such approval:

(i) if a class of the Company’s securities is then listed on a securities
exchange, would cause Rule 16b-3 to become unavailable with respect to the Plan;
or

(ii) would violate the rules or regulations of the NASDAQ Stock Market, any
other securities exchange or the Financial Industry Regulatory Authority, Inc.
that are applicable to the Company.

(b)  Amendments to Awards. Except as otherwise expressly provided in the Plan,
the Committee may waive any conditions of or rights of the Company under any
outstanding Award, prospectively or retroactively. Except as otherwise expressly
provided in the Plan (specifically including the next two sentences hereof), the
Committee may amend, alter, suspend, discontinue or terminate any outstanding
Award, prospectively or retroactively, but no such action may adversely affect
the rights of the holder of such Award without the consent of the Participant or
holder or beneficiary thereof. If any provision of the Plan or an Award
Agreement would result in adverse tax consequences under Section 409A, the
Committee may amend that provision (or take any other action reasonably
necessary) to avoid any adverse tax results and no action taken to comply with
Section 409A shall be deemed to impair or otherwise adversely affect the rights
of any holder of an Award or beneficiary thereof. In the event of any
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company or any other
similar corporate transaction or event involving the Company (or the Company
shall enter into a written agreement to undergo such a transaction or event),
the Committee or the Board may, in its sole discretion, provide for any of the
following to be effective upon the consummation of the event (or effective
immediately prior to the consummation of the event, provided that the
consummation of the event subsequently occurs):

(i) either (A) termination of any such Award, whether or not vested, in exchange
for an amount of cash and/or other property, if any, equal to the amount that
would have been attained upon the exercise of the vested portion of such Award
or realization of the Participant’s vested rights (and, for the avoidance of
doubt, if, as of the date of the occurrence of the transaction or event
described in this Section 7(b)(i)(A), the Committee or the Board determines in
good faith that no amount would have been attained upon the exercise of the
vested portion of such Award or realization of the Participant’s vested rights,
then such Award may be terminated by the Company without any payment) or (B) the
replacement of such Award with other rights or property selected by the
Committee or the Board, in its sole discretion;

(ii) that such Award be assumed by the successor or survivor corporation, or a
parent or subsidiary thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or survivor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices;

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(iii) that such Award shall be exercisable or payable or fully vested with
respect to all Shares covered thereby, notwithstanding anything to the contrary
in the applicable Award Agreement; or

(iv) that the Award cannot vest, be exercised or become payable after a date
certain in the future, which may be the effective date of such event.

(c)  Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.

Section 8.

Income Tax Withholding; Tax Bonuses.

(a)  Withholding. In order to comply with all applicable federal or state income
tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal or state payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of a
Participant are withheld or collected from such Participant. In order to assist
a Participant in paying all or a portion of the federal and state taxes to be
withheld or collected upon exercise or receipt of (or the lapse of restrictions
relating to) an Award, the Committee, in its discretion and subject to such
additional terms and conditions as it may adopt, may permit the Participant to
satisfy such tax obligation by (i) electing to have the Company withhold a
portion of the Shares otherwise to be delivered upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes or (ii) electing to deliver to the Company Shares
other than Shares issuable upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes. The election, if any, must be made on or before the date
that the amount of tax to be withheld is determined.

(b)  Tax Bonuses. The Committee, in its discretion, shall have the authority, at
the time of grant of any Award under this Plan or at any time thereafter, to
approve cash bonuses to designated Participants to be paid upon their exercise
or receipt of (or the lapse of restrictions relating to) Awards in order to
provide funds to pay all or a portion of federal and state taxes due as a result
of such exercise or receipt (or the lapse of such restrictions). The Committee
shall have full authority in its discretion to determine the amount of any such
tax bonus.

Section 9.

General Provisions.

(a) Actions Required Upon Grant of Award.  Following the issuance of any Award
under the Plan, the Company shall comply with any applicable announcement and
notification requirements set forth in the listing requirements of the
applicable securities exchange.

(b)  No Rights to Awards. No Eligible Person, Participant or other Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.

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(c)  Award Agreements. No Participant will have rights under an Award granted to
such Participant unless and until an Award Agreement shall have been duly
executed on behalf of the Company and, if requested by the Company, signed by
the Participant.

(d)  No Limit on Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in effect
other or additional compensation arrangements, and such arrangements may be
either generally applicable or applicable only in specific cases.

(e)  No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate, nor will it affect in any way the right of the Company or an
Affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an Affiliate may at any time dismiss a Participant from
employment free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.

(f)  Governing Law. The validity, construction and effect of the Plan or any
Award, and any rules and regulations relating to the Plan or any Award, shall be
determined in accordance with the laws of the State of Minnesota.

(g)  Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.

(h)  No Trust or Fund Created. Neither the Plan nor any 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 Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.

(i)  No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash shall be paid in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.

(j)  Headings. Headings are given to the Sections and subsections 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.

(k)  Other Benefits. No compensation or benefit awarded to or realized by any
Participant under the Plan shall be included for the purpose of computing such
Participant’s compensation under any compensation-based retirement, disability,
or similar plan of the Company unless required by law or otherwise provided by
such other plan.

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Section 10.

Effective Date of the Plan.

The Plan shall be effective as of the date of its approval and adoption by the
Board. 

Section 11.

Term of the Plan.

Awards shall only be granted under the Plan during a 10-year period beginning on
the date of approval by the Board. However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond the end of such 10-year period, and the authority of the
Committee provided for hereunder with respect to the Plan and any Awards, and
the authority of the Board to amend the Plan and to waive any conditions or
rights of the Company under any Award pursuant to 7(b) hereof, shall extend
beyond the termination of the Plan.

Section 12.

Stockholder Approval. It is expressly intended that approval of the Company’s
stockholders not be required as a condition of the effectiveness of the Plan,
and the Plan’s provisions shall be interpreted in a manner consistent with such
intent for all purposes.  Specifically, NASDAQ Stock Market Rule 5635(c)
generally requires stockholder approval for stock option plans or other equity
compensation arrangements adopted by companies whose securities are listed on
the NASDAQ Stock Market pursuant to which stock awards or stock may be acquired
by officers, directors, employees or consultants of such companies.  NASDAQ
Stock Market Rule 5635(c)(4) provides an exemption in certain circumstances for
“employment inducement” awards (within the meaning of NASDAQ Stock Market Rule
5635(c)(4)).  Notwithstanding anything to the contrary herein, if the Company’s
securities are traded on the NASDAQ Stock Market, then Awards under the Plan may
only be made to employees who have not previously been an employee or Director
of the Company or an Affiliate, in each case as an inducement material to the
employee’s entering into employment with the Company or an Affiliate.  Awards
under the Plan will be approved by (a) the Committee, comprised of a majority of
the Company’s Independent Directors, or (b) a majority of the Company’s
Independent Directors.  Accordingly, pursuant to NASDAQ Stock Market Rule
5635(c)(4), the issuance of Awards and the shares of Stock issuable upon
exercise or vesting of such Awards pursuant to the Plan are not subject to the
approval of the Company’s stockholders.

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