**Exhibit10.19**

**VITAL IMAGES, INC.2006 LONG-TERM INCENTIVE PLAN**

**Effective Date: March 9, 2006**

 

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**VITAL IMAGES, INC.2006 LONG-TERM INCENTIVE PLAN**

**Table of Contents**
| Section | ** ** | ** **                                                          | ** ** | **Page** | ** ** |
|---------|------------|---------------------------------------------------------------------|------------|----------|------------|
| **1.**  | ** ** | **Purpose  of the Plan**                                            | ** ** | **1**    | ** ** |
| **2.**  | ** ** | **Definitions**                                                     | ** ** | **1**    | ** ** |
| **3.**  | ** ** | **Shares  Subject to the Plan**                                     | ** ** | **3**    | ** ** |
| **4.**  | ** ** | **Administration**                                                  | ** ** | **4**    | ** ** |
| **5.**  | ** ** | **Term of  Plan**                                                   | ** ** | **6**    | ** ** |
| **6.**  | ** ** | **Terms  and Conditions of Qualified Options**                      | ** ** | **6**    | ** ** |
| **7.**  | ** ** | **Terms  and Conditions of Non-Qualified Options**                  | ** ** | **10**   | ** ** |
| **8.**  | ** ** | **Automatic  Grants of Director Options to Non-employee Directors** | ** ** | **13**   | ** ** |
| **9.**  | ** ** | **Terms  and Conditions of Stock Appreciation Rights**              | ** ** | **17**   | ** ** |
| **10.** | ** ** | **Awards  of Restricted Stock**                                     | ** ** | **19**   | ** ** |
| **11.** | ** ** | **Other  Awards**                                                   | ** ** | **21**   | ** ** |
| **12.** | ** ** | **Performance-Based  Awards**                                       | ** ** | **22**   | ** ** |
| **13.** | ** ** | **Adjustments  Upon Certain Events**                                | ** ** | **23**   | ** ** |
| **14.** | ** ** | **Shares  Acquired for Investment**                                 | ** ** | **26**   | ** ** |
| **15.** | ** ** | **No  Right to Employment, Service as a Director or Awards**        | ** ** | **26**   | ** ** |
| **16.** | ** ** | **Other  Benefit and Compensation Programs**                        | ** ** | **27**   | ** ** |
| **17.** | ** ** | **Successors  and Assigns**                                         | ** ** | **27**   | ** ** |
| **18.** | ** ** | **Nontransferability  of Awards; Designation of Beneficiary**       | ** ** | **27**   | ** ** |
| **19.** | ** ** | **Amendments  or Termination**                                      | ** ** | **27**   | ** ** |
| **20.** | ** ** | **International  Participants**                                     | ** ** | **28**   | ** ** |
| **21.** | ** ** | **General**                                                         | ** ** | **28**   | ** ** |
| **22.** | ** ** | **Effective Date**                                                  | ** ** | **29**   | ** ** |

 

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**Vital Images, Inc.2006 LONG-TERM INCENTIVE PLAN**

**1.****                                     ****Purpose of the Plan**

The purpose of the Planis to aid the Company and its Affiliates in recruiting and retaining employees,directors, independent contractors and other service providers to the Companyand to motivate such employees, directors, independent contractors and otherservice providers to exert their best efforts on behalf of the Company and itsAffiliates by providing incentives through the granting of Awards.  The Company expects that it will benefit fromthe stock ownership opportunities and other benefits provided to suchParticipants under this Plan to encourage alignment of their interest in theCompany’s success with that of other stakeholders.

**2.****                                       Definitions**

The following capitalizedterms used in the Plan have the respective meanings set forth in this Section;other terms are defined elsewhere in the Plan:

(a)                                  ***“Affiliate”***means aParent or Subsidiary.

(b)                                 ***“Award”***means anOption, Stock Appreciation Right, Share of Restricted Stock, Other Stock-BasedAward or Other Cash-Based Award granted pursuant to the Plan.

(c)                                  ***“Board”***means theBoard of Directors of the Company.

(d)                                 ***“Cause”*** (as determined by the Committee) means “cause”(or a similar term) as defined in any employment or other agreement or policyapplicable to the Participant or, if no such agreement or policy exists, means(i) dishonesty, fraud, misrepresentation, embezzlement or deliberateinjury or attempted injury, in each case related to the Company or anyAffiliate, (ii) any unlawful or criminal activity of a serious nature,(iii) any intentional and deliberate breach of a duty or duties that,individually or in the aggregate, are material in relation to the Participant’soverall duties, or (iv) any material breach of any employment, service,confidentiality or non-compete agreement entered into with the Company or anyAffiliate.

(e)                                  “***Code”***means theInternal Revenue Code of 1986, as amended, or any successor thereto.

(f)                                    ***“Committee”***means theCompensation Committee of the Board or, if the Board has not appointed aseparate Compensation Committee, the entire Board.

(g)                                 ***“Common Stock”*** meansthe Company’s common stock, $0.01 par value per share.

(h)                                 ***“Company”***means VitalImages, Inc., a Minnesota corporation.

(i)                                     ***“Continuous Status as a Director”***means the absence of any interruption or termination of service as aDirector.  If the leave of absence isapproved by the 

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Committee, Continuous Status as a Director shall not be considered asinterrupted in the case of sick leave, military leave, or any other leave ofabsence.

(j)                                     ***“Director”*** means amember of the Board of Directors of the Company.

(k)                                  ***“Director Option”***means a Non-Qualified Option granted to a Director pursuant toSection 8.

(l)                                     ***“Disability”*** meansthe disability of the Participant such as would entitle the Participant toreceive disability income benefits pursuant to the long-term disability plan ofthe Company or any Affiliate covering the Participant or, if no such planexists or is applicable to the Participant, the permanent and total disabilityof the Participant within the meaning of Section 22(e)(3) of the Code.

(m)                               ***“Employee”*** means anyperson, including officers and Directors, employed by the Company or anySubsidiary.  The payment to a Director bythe Company of directors’ fees shall not be sufficient to constitute employmentby the Company.

(n)                                 ***“Exchange Act”*** meansthe Securities Exchange Act of 1934, as amended.

(o)                                 ***“Exercise Price”*****means the purchase price per Share underthe terms of an Option.

(p)                                 ***“Fair Market Value”***means,on a given date, (i) if the Common Stock islisted or admitted to unlisted trading privileges on any national securitiesexchange, the average of the closing sales prices of the Common Stock on theend of any day on all national securities exchanges on which the Common Stockmay at the time be listed or, if there have been no sales on any such exchangeon any day, the average of the highest bid and lowest asked prices on all suchexchanges at the end of such day or, (ii) if the Common Stock is not so listedor admitted but transactions in the Common Stock are reported on The NasdaqStock Market, the closing price quoted on The Nasdaq Stock Market on such day,or (iii) if the Common Stock is not so listed or admitted to unlisted tradingprivileges or quoted on The Nasdaq Stock Market, and bid and asked pricestherefor in the domestic over-the-counter market are reported by Pink SheetsLLC (or any comparable reporting service), the average of the closing bid andasked prices on such day as reported by Pink Sheets LLC (or any comparablereporting service), or (iv) if the Common Stock is not listed on any nationalsecurities exchange or quoted on The Nasdaq Stock Market or in the domesticover-the-counter market, the fair value of the Common Stock determined by theCommittee in good faith in the exercise of its reasonable discretion.

(q)                                 ***“Non-employeeDirector”*** means a Directorwho is not an Employee of the Company.

(r)                                    ***“Non-Qualified Option”***means a stock option granted pursuant to Section 7 that does not qualifyas an incentive stock option as defined in Section 422 of the Code.

(s)                                  ***“Option”*** means aQualified Option or a Non-Qualified Option (including a Director Option).

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(t)                                    ***“Other Stock-Based Awards”***meansAwards granted pursuant to Section 11(a) or Section 12.

(u)                                 **“*Other Cash-BasedAwards*”** means Awards granted pursuant to Section 11(b) orSection 12.

(v)                                 ***“Parent”*** means any “parentcorporation” of the Company, as such term is defined in Section 424(e) of theCode or any successor provision.  Theterm shall include any Parent which becomes such after adoption of the Plan.

(w)                               ***“Participant”***meansan employee of the Company or an Affiliate who is selected by the Committee toparticipate in the Plan; a Director of the Company who receives DirectorOptions or other Awards under the Plan; or any consultant, agent, advisor orindependent contractor who is selected by the Committee to participate in thePlan and who renders bona fide services to the Company or an Affiliate that(i) are not in connection with the offer and sale of the Company’ssecurities in a capital-raising transaction and (ii) do not directly orindirectly promote or maintain a market for the Company’s securities.  Except where the context otherwise requires,references in this Plan to “employment” and related terms shall apply toservices in any such capacity.

(x)                                   ***“Performance-Based Awards”***meansOptions, Awards of Restricted Stock, Other Stock-Based Awards and OtherCash-Based Awards granted pursuant to Section 12.

(y)                                 ***“Plan”*****means this Vital Images, Inc. 2006Long-Term Incentive Plan, as amended or supplemented from time to time.

(z)                                   ***“Qualified Option”***means a stock option granted pursuant to Section 6 that is intended toqualify as an incentive stock option under Section 422 of the Code.

(aa)                            ***“Restricted Stock”***meansany shares of Common Stock granted under Section 10.

(bb)                          ***“Stock Appreciation Right”***meansa stock appreciation right granted pursuant to Section 9.

(cc)                            ***“Subsidiary”*****means any “subsidiary corporation” of theCompany, as such term is defined in Section 424(f) of the Code.  The term shall include any Subsidiary whichbecomes such after adoption of the Plan.

**3.****                                     ****Shares****Subject tothe Plan**

(a)                                  ***Number of Shares.***  The total number of shares of Common Stockwhich may be issued under the Plan is 900,000 shares.  The full number of shares of Common Stockavailable under the Plan may be used for any Option or other type ofAward.  The aggregate number of shares ofCommon Stock available under the Plan shall be subject to adjustment upon theoccurrence of any of the events and in the manner set forth in Section 13.  Any shares of Common Stock subject to Awards,other than Awards of Restricted Stock, shall be counted against the numericallimits of this Section 3(a) as one share of Common Stock for every share ofCommon Stock subject to such Award.  However, any share of Common 

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Stock subject to an Award of Restricted Stock shall be counted againstthe numerical limits of this Section 3(a) as two shares of Common Stock forevery one share of Common Stock subject to the Award of Restricted Stock. To the extent that a share of Common Stock that was subject to an Award ofRestricted Stock that counted as two shares of Common Stock against thenumerical limits of this Section 3(a) pursuant to the preceding sentence isrecycled back into the Plan under Section 3(b), the Plan shall be credited withtwo shares of Common Stock.

(b)                                 ***Treatment of Reacquired and OtherShares.***  If all or anyportion of an Option or Stock Appreciation Right expires or is terminated,surrendered or cancelled without having been fully exercised, if all or anyportion of an Award of Restricted Stock is forfeited to or repurchased by theCompany, or if any other grant of an Award results in any shares of CommonStock not being issued or being forfeited to or repurchased by the Company, theunpurchased, forfeited, repurchased or reacquired shares of Common Stockcovered by such Award shall again be available for the grant of Awards underthe Plan.  With respect to StockAppreciation Rights, when a stock-settled Stock Appreciation Right isexercised, the shares of Common Stock subject to the Stock Appreciation Rightgrant agreement shall be counted against the numerical limits of Section 3(a)above as one share for every share subject thereto, regardless of the number ofshares of Common Stock used to settle the Stock Appreciation Right uponexercise.  Shares of Common Stock thathave actually been issued under the Plan under any Award shall not be returnedto the Plan and shall not become available for future distribution under thePlan; provided, however, that if shares of Common Stock subject to an Award ofRestricted Stock or any other Award are repurchased by the Company at theiroriginal purchase price or are forfeited to the Company, such shares shallbecome available for future grant under the Plan.  Shares of Common Stockused to pay the exercise price of an Option shall not become available forfuture grant or sale under the Plan.  Shares used to satisfy tax withholdingobligations shall not become available for future grant or sale under thePlan.  To the extent an Award under the Plan is paid out in cash ratherthan shares of Common Stock, such cash payment shall not reduce the number ofShares available for issuance under the Plan.  Any payout of dividends ordividend equivalents with respect to an Award, because they are payable only incash, shall not reduce the number of shares of Common Stock available underSection 3(a) for issuance under the Plan, and any forfeiture of dividend ordividend equivalents shall not increase the number of shares available underSection 3(a) for issuance under the Plan. No fractional shares of Common Stock will be issued under the Plan, butinstead any fractional Share will be rounded downward to the next lowest wholeShare.

**4.****                                     ****Administration**

(a)                                  ***Delegation of Authority.***  The Plan shall be administered by theCommittee.  The Committee shall consistof the Board, unless the Board appoints a Committee consisting of at leastthree but fewer than all the members of the Board.  If the Committee does not consist of theentire Board, the Committee’s members shall serve at the pleasure of the Board,which may from time to time appoint members 

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in substitution for members previously appointed and fill vacancies,however caused, in the Committee.  TheCommittee may select one of its members as its Chairperson and shall hold itsmeetings at such times and places as it may determine.  A majority of the Committee’s members shallconstitute a quorum.  All determinationsof the Committee made at a meeting in which a quorum is present shall be madeby a majority of its members present at the meeting.  Any decision or determination of theCommittee reduced to writing and signed by a majority of the members shall befully as effective as if it had been made by a majority vote at a meeting dulycalled and held.

(b)                                 ***Authority of Committee.***  The Committee shall have exclusive power tomake Awards and to determine when and to whom Awards shall be granted, and theform, amount and other terms and conditions of each Award, subject to theprovisions of this Plan and any applicable law or regulation.  The Committee may determine whether, to whatextent and under what circumstances Awards may be settled, paid or exercised incash, shares of Common Stock or other Awards or other property, or cancelled,forfeited or suspended.  The Committeeshall have the authority to interpret this Plan and any Award or agreement madeunder this Plan, to establish, amend, waive and rescind any rules andregulations relating to the administration of this Plan, to determine the termsand provisions of any agreements entered into hereunder (not inconsistent withthis Plan), and to make all other determinations necessary or advisable for theadministration of this Plan.  TheCommittee may correct any defect, supply any omission or reconcile anyinconsistency in this Plan or in any Award or agreement in the manner and tothe extent it shall deem desirable.  Thedeterminations of the Committee in the administration of this Plan, asdescribed herein, shall be final, binding and conclusive.

(c)                                  ***Indemnification.***  To the full extent permitted by law, eachmember and former member of the Committee and each person to whom the Committeedelegates or has delegated authority under this Plan shall be entitled toindemnification by the Company against and from any loss, liability, judgment,damages, cost and reasonable expense incurred by such member, former member orother person by reason of any action taken, failure to act or determinationmade in good faith under or with respect to this Plan.

(d)                                 ***Tax Withholding.***  The Committee shall have the right to requirepayment by a Participant of any amount it may determine to be necessary towithhold for federal, state, local, non-U.S. income, payroll or other taxes(collectively, the “Taxes”) as a result of the exercise, grant or vesting of anAward.  The Participant may pay a portionor all of such Taxes by delivering shares of Common Stock to the Company orhaving the Company withhold shares of Common Stock, including shares ofRestricted Stock, with a Fair Market Value or cash equal to the amount of suchTaxes that would have otherwise been payable by the Participant.  If a Participant does not notify the Companybefore the date of exercise, grant or vesting of an Award that will result inTaxes being due from the Participant as to how the Participant intends to paysuch Taxes, the Company may, in its sole discretion, (i) withhold shares ofCommon Stock subject to the Award with a Fair Market Value sufficient to paysuch Taxes and/or (ii) require 

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the payment by the Participant of such Taxes in cash before deliveringto the Participant the shares of Common Stock subject to the Award.

(e)                                  ***Deferral.***  In the discretion of the Committee, inaccordance with any procedures established by the Committee and consistent withthe provisions of Section 162(m) of the Code when applied to Participantswho may be “covered employees” thereunder, a Participant may be permitted todefer the issuance of shares of Common Stock or cash deliverable upon theexercise of an Option or Stock Appreciation Right, vesting of Restricted Stock,or satisfaction of Other Stock-Based Awards or Other Cash-Based Awards, for aspecified period or until a specified date, but not beyond the expiration ofthe term of such Option, Stock Appreciation Right, Restricted Stock grant, orother Award.

(f)                                    ***Dividends or Dividend Equivalents.***  If the Committee so determines, any Awardgranted under the Plan may be credited with dividends or dividend equivalentspaid with respect to any underlying shares of Common Stock.  The Committee may apply any restrictions tothe dividends or dividend equivalents that the Committee deems appropriate andmay determine the form of payment, including cash, shares of Common Stock,Restricted Stock or otherwise.

**5.****                                     ****Term of Plan**

This Plan shall commence on March 9, 2006 (the “Effective Date”) andshall terminate on March 9, 2016 or at such earlier date as the Board ofDirectors shall determine.  Thetermination of this Plan shall not affect any Awards then outstanding under thePlan.  No Award may be granted under thePlan after March 9, 2016.

**6.****                                      Termsand Conditions of Qualified Options**

Options granted under the Plan may be Qualified Options.  When the Committee approves a grant of aQualified Option to a Participant, it shall prepare or cause to be prepared anoption agreement (“Qualified Option Agreement”) setting forth the terms of theQualified Option, and such Qualified Option Agreement shall be signed on behalfof the Company and by the Participant. Qualified Options granted under this Plan shall be subject to theforegoing and to the following terms and conditions and to such other terms andconditions, not inconsistent therewith, as the Committee shall determine:

(a)                                  ***Number of Shares and Exercise Price.***  The Qualified Option Agreement shall statethe total number of shares of Common Stock subject to the Qualified Option itevidences, the Exercise Price per share of Common Stock, and the other terms ofthe Qualified Option.  The Exercise Priceof any Qualified Option shall be equal to or greater than Fair MarketValue.  The number of shares of CommonStock subject to the Qualified Option and the Exercise Price shall beadjustable as provided in Section 12(a) of this Plan.  Qualified Option Agreements may beelectronically delivered by the Company to the Participant under thisprovision.

(b)                                 ***Exercisability; Term.***  Qualified Options granted under the Planshall be exercisable at such time(s) and upon such terms and conditions as maybe determined by the Committee.  However,subject to Section 6(n), a Qualified Option shall not be exercisable more thanfive (5) years after the date it is granted. 

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The period during which a Qualified Option may be exercised once it isgranted may not be reduced, except as provided in Sections 6(e), (f) and (g) ofthis Plan.

(c)                                  ***Exercise of Qualified Options.***  Except as otherwise provided in theapplicable Qualified Option Agreement, a Qualified Option may be exercised forall, or from time to time any part, of the shares of Common Stock for which itis then exercisable.  For purposes ofthis Section 6, the exercise date of a Qualified Option shall be the date awritten or electronic notice of exercise and full payment of the purchase priceare received by the Company in accordance with this Section 6(c) and Section6(d) below.  The purchase price for theshares of Common Stock as to which a Qualified Option is exercised shall bepaid to the Company in cash or its equivalent, such as by check or wiretransfer, or, if provided in the Qualified Option Agreement or with the consentof the Committee:  (i) in shares ofCommon Stock having a Fair Market Value equal to the aggregate Exercise Priceof the shares of Common Stock being purchased and satisfying such otherrequirements as may be imposed by the Committee; provided, that such shareswere then purchased on the open market or have been held by the Participant forat least six months (or such other period as established from time to time bythe Committee in order to avoid adverse accounting treatment under generallyaccepted accounting principles); (ii) partly in cash and partly in such shares;or (iii) if there is a public market for the shares of Common Stock at suchtime, through the delivery of irrevocable instructions to a broker to sellshares of Common Stock obtained upon the exercise of the Qualified Option andto deliver promptly to the Company an amount out of the proceeds of such saleequal to the aggregate Exercise Price for the shares being purchased.

(d)                                 ***Manner of Exercise of QualifiedOptions.***  A QualifiedOption shall be exercised only by the Participant (i) delivering a completedand signed written or electronic notice of exercise to the Company in the formprescribed by the Company specifying the number of shares of Common Stock as towhich the Qualified Option is being exercised; (ii) delivering the originalQualified Option Agreement to the Company; and (iii) paying to the Company thefull amount of the Exercise Price for the number of shares of Common Stock withrespect to which the Qualified Option is being exercised as provided in Section6(c) above.  When shares of Common Stockare issued to the Participant upon the exercise of that Participant’s QualifiedOption, the fact of such issuance shall be noted on the Qualified OptionAgreement by the Company before the Qualified Option Agreement is returned tothe Participant.  When all shares ofCommon Stock covered by the Qualified Option Agreement have been issued by theCompany to the Participant or when the Qualified Option expires, theParticipant shall deliver the Qualified Option Agreement to the Company, whichshall cancel it.  After the receipt bythe Company of the written or electronic notice of exercise and payment in fullof the Exercise Price in accordance with Sections 6(c) and 6(d), the Companyshall deliver or cause to be delivered to the Participant exercising theQualified Option stock certificates evidencing the number of shares withrespect to which the Qualified Option has been exercised, issued in theParticipant’s name; provided, however, that such delivery shall be deemedeffective for all purposes when the Company or its stock transfer agent (ifany) has deposited such stock certificates in the United States mail, postageprepaid, 

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addressed to the Participant at the address specified in the written orelectronic notice of exercise.  QualifiedOption Agreements may be electronically delivered by the Participant to theCompany under this provision.

(e)                                  ***Termination of Employment orService.***  If a Participantwho holds a Qualified Option shall cease to be employed by or performingservices for the Company or any Affiliate for any reason other than death orDisability, unless the applicable Qualified Option Agreement providesotherwise, such Qualified Option shall immediately and automatically terminateand be forfeited, whether or not exercisable, and neither such Participant norany of the Participant’s heirs, personal representatives, successors or assignsshall have any rights with respect to such Qualified Option; provided, however, that if such termination isdue to any reason other than termination by the Company or any Affiliate forCause, all outstanding Qualified Options then held by such Participant willremain exercisable to the extent they were exercisable as of such terminationfor a period of three (3) months after such termination (but in no event afterthe expiration date of any such Qualified Option).  Unless the applicable Qualified OptionAgreement provides otherwise, if an independent contractor or othernon-employment relationship between the Participant and the Company or anAffiliate is terminated due to the commencement of an employment relationshipwith the Company or an Affiliate, or if an employment relationship between theParticipant and the Company or an Affiliate is terminated due to thecommencement of an independent contractor or other non-employment relationshipwith the Company or an Affiliate, such change in status shall be a terminationof employment or service under this Section 6(e).

(f)                                    ***Death or Disability of Participant.***  Unless otherwise provided in the applicableQualified Option Agreement, if a Participant who is a natural person shallcease to be employed by or performing services for the Company or any Affiliateas a result of the Participant’s death or Disability, any Qualified Option heldby such Participant will become immediately exercisable in full and will remainexercisable for a period of one (1) year after the date of termination, but inno case later than the expiration date of such Qualified Option.  Upon the death of a Participant, andQualified Option held by such Participant may be exercised pursuant to Sections6(c) and (d) of this Plan only by the person or persons to whom the Participant’srights under the Qualified Option shall pass by will or the laws of descent anddistribution.

(g)                                 ***Modificationof Rights Upon Termination.***  Notwithstanding the other provisions of thisSection 6, upon a Participant’s termination of employment or other servicewith the Company and all Affiliates, the Committee may, in its sole discretion(which may be exercised at any time on or after the date of grant, includingfollowing such termination), cause Qualified Options (or any part thereof) thenheld by such Participant to become or continue to become exercisable and/orremain exercisable following such termination of employment or service, in eachcase in the manner determined by the Committee; provided, however, that noQualified Option may remain exercisable beyond its expiration date.

(h)                                 ***Breach ofConfidentiality or Non-compete Agreements.*** Notwithstanding anything in the Plan to the contrary, if a Participantmaterially breaches the terms of any 

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confidentiality or non-compete agreement enteredinto with the Company or any Affiliate, whether such breach occurs before orafter termination of such Participant’s employment or other service with theCompany or any Affiliate, the Committee, in its sole discretion, mayimmediately terminate all rights of the Participant under the Plan and anyagreements evidencing a Qualified Option then held by the Participant withoutnotice of any kind.

(i)                                     ***Date ofTermination of Employment or Other Service.***  Unless theCommittee otherwise determines in its sole discretion, a Participant’semployment or other service will, for purposes of the Plan, be deemed to haveterminated on the date recorded on the personnel or other records of theCompany or the Affiliate for which the Participant provides employment or otherservice, as determined by the Committee in its sole discretion based upon suchrecords.

(j)                                     ***No Obligation to Exercise QualifiedOption.***  The grant of aQualified Option under the Plan shall impose no obligation on the Participantto exercise such Qualified Option.

(k)                                  ***Eligible Recipients.***  Qualified Options may be granted only topersons who are employees of the Company or an Affiliate.

(l)                                     ***Exercise Price.***  Subject to the provisions of Section 6(n),the exercise price of shares of Common Stock that are subject to a QualifiedOption shall not be less than 100% of the Fair Market Value of such shares atthe time the Qualified Option is granted, as determined in good faith by theCommittee.

(m)                               ***Limit on Exercisability.***  The aggregate Fair Market Value (determinedat the time the Qualified Option is granted) of the shares of Common Stock withrespect to which Qualified Options are exercisable by the Participant for thefirst time during any calendar year, under this Plan or any other plan of theCompany or any Affiliate, shall not exceed $100,000.  To the extent a Qualified Option exceeds this$100,000 limit, the portion of the Qualified Option in excess of such limitshall be deemed a Non-Qualified Option.

(n)                                 ***Restrictions for CertainShareholders.***  Thepurchase price of shares of Common Stock that are subject to a Qualified Optiongranted to an employee of the Company or any Affiliate who, at the time suchQualified Option is granted, owns 10% or more of the total combined votingpower of all classes of stock of the Company or of any Affiliate, shall not beless than 110% of the Fair Market Value of such shares on the date suchQualified Option is granted, and such Qualified Option may not be exercisablemore than five (5) years after the date on which it is granted.  For the purposes of this subparagraph, therules of Section 424(d) of the Code shall apply in determining the stockownership of any employee of the Company or any Affiliate.

(o)                                 ***Limits on Transferability andExercise of Qualified Options.*** In addition to any other restriction or limitations on transfer setforth in this Plan or in the applicable Qualified Option Agreement, QualifiedOptions shall not be transferable except by will or the laws of descent anddistribution, and Qualified Options shall be exercisable during a Participant’slifetime only by such Participant.

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(p)                                 ***Effect of Not Meeting QualifiedOption Requirements.*** Subject to the discretion of the Committee to provide otherwise, if theterms of a Qualified Option do not meet any requirements of this Plan or theCode necessary to be treated as a Qualified Option under the Code, suchQualified Option shall not terminate but shall be a Non-Qualified Optiongranted under this Plan.

**7.****                                     ****Terms and Conditions ofNon-Qualified Options**

Options grantedunder the Plan may be Non-Qualified Options. When the Committee approves a grant of a Non-Qualified Option to aParticipant, it shall prepare or cause to be prepared an option agreement (“Non-QualifiedOption Agreement”) setting forth the terms of the Non-Qualified Option, andsuch Non-Qualified Option Agreement shall be signed on behalf of theCompany and by the Participant. Non-Qualified Options granted under this Plan shall be subject to theforegoing and to the following terms and conditions and to such other terms andconditions, not inconsistent therewith, as the Committee shall determine;provided, however, that Non-Qualified Options that are Director Optionsshall be governed by the provisions of Section 8 to the extent that theyare inconsistent with the provisions of this Section 7.

(a)                                  ***Number of Shares and Exercise Price.***  The Non-Qualified Option Agreementshall state the total number of shares of Common Stock subject to theNon-Qualified Option it evidences, the Exercise Price per share of CommonStock, and the other terms of the Non-Qualified Option.  The Exercise Price of any Non-QualifiedOption shall be equal to or greater than Fair Market Value.  The number of shares of Common Stock subjectto the Non-Qualified Option and the Exercise Price shall be adjustable asprovided in Section 13(a) of this Plan. Non-Qualified Option Agreements may be electronically delivered by theCompany to a Participant under this provision.

(b)                                 ***Exercisability; Term.***  Non-Qualified Options granted under the Planshall be exercisable at such time(s) and upon such terms and conditions as maybe determined by the Committee, but in no event shall a Non-Qualified Option beexercisable more than eight (8) years after the date it is granted, except asthe Committee may determine under Section 13(e) of the Plan.  The period during which a Non-QualifiedOption may be exercised once it is granted may not be reduced, except asprovided in Sections 7(e), (f) and (g) of this Plan.

(c)                                  ***Exercise of Non-Qualified Options.***  Except as otherwise provided in theapplicable Non-Qualified Option Agreement, a Non-Qualified Option may beexercised for all, or from time to time any part, of the shares of Common Stockfor which it is then exercisable.  Forpurposes of this Section 7, the exercise date of a Non-Qualified Optionshall be the date a written or electronic notice of exercise and full paymentof the purchase price are received by the Company in accordance with thisSection 7(c) and Section 7(d) below.  Thepurchase price for the shares of Common Stock as to which a Non-QualifiedOption is exercised shall be paid to the Company in cash or its equivalent,such as by check or wire transfer or, if provided in the Non-QualifiedOption Agreement or with the consent of the Committee:  (i) in shares of Common Stock having a FairMarket Value equal to the aggregate Exercise Price of the shares of CommonStock being purchased and satisfying such other requirements as may be imposedby the Committee; provided, that such shares were then purchased on the openmarket or

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have been held by the Participant for at least six months (or suchother period as established from time to time by the Committee in order toavoid adverse accounting treatment under generally accepted accountingprinciples); (ii) partly in cash and partly in such shares; or (iii) if thereis a public market for the shares of Common Stock at such time, through thedelivery of irrevocable instructions to a broker to sell shares of Common Stockobtained upon the exercise of the Non-Qualified Option and to deliverpromptly to the Company an amount out of the proceeds of such sale equal to theaggregate Exercise Price for the shares being purchased.

(d)                                 ***Manner of Exercise of Non-QualifiedOptions.***  A Non-QualifiedOption shall be exercised only by the Participant (i) delivering a completedand signed written or electronic notice of exercise to the Company in the formprescribed by the Company specifying the number of shares of Common Stock as towhich the Non-Qualified Option is being exercised; (ii) delivering the originalNon-Qualified Option Agreement to the Company; and (iii) paying to theCompany the full amount of the Exercise Price for the number of shares ofCommon Stock with respect to which the Non-Qualified Option is being exercisedas provided in Section 7(c) above.  Whenshares of Common Stock are issued to the Participant upon the exercise of thatParticipant’s Non-Qualified Option, the fact of such issuance shall be noted onthe Non-Qualified Option Agreement by the Company before the Non-QualifiedOption Agreement is returned to the Participant.  When all shares of Common Stock covered bythe Non-Qualified Option Agreement have been issued by the Company to theParticipant or when the Non-Qualified Option expires, the Participantshall deliver the Non-Qualified Option Agreement to the Company, whichshall cancel it.  After the receipt bythe Company of the written or electronic notice of exercise and payment in fullof the Exercise Price in accordance with Sections 7(c) and 7(d), the Companyshall deliver or cause to be delivered to the Participant exercising theNon-Qualified Option stock certificates evidencing the number of shares withrespect to which the Non-Qualified Option has been exercised, issued in theParticipant’s name; provided, however, that such delivery shall be deemedeffective for all purposes when the Company or its stock transfer agent (ifany) has deposited such stock certificates in the United States mail, postageprepaid, addressed to the Participant at the address specified in the writtenor electronic notice of exercise.  Non-Qualified Option Agreements may beelectronically delivered by the Participant to the Company under thisprovision.

(e)                                  ***Termination of Employment orService.***  If a Participantwho holds a Non-Qualified Option shall cease to be employed by orperforming services for the Company or any Affiliate for any reason other thandeath or Disability, unless the applicable Non-Qualified Option Agreementprovides otherwise, such Non-Qualified Option shall immediately andautomatically terminate and be forfeited, whether or not exercisable, andneither such Participant nor any of the Participant’s heirs, personalrepresentatives, successors or assigns shall have any rights with respect tosuch Non-Qualified Option; provided,however, that if such termination is due to any reason other than terminationby the Company or any Affiliate for Cause, all outstanding Non-QualifiedOptions then held by such Participant will remain exercisable to the extentthey were exercisable as of such

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termination for a period of three (3) monthsafter such termination (but in no event after the expiration date of any suchNon-Qualified Option).  Unless theapplicable Qualified Option Agreement provides otherwise, if an independentcontractor or other non-employment relationship between the Participant and theCompany or an Affiliate is terminated due to the commencement of an employmentrelationship with the Company or an Affiliate, or if an employment relationshipbetween the Participant and the Company or an Affiliate is terminated due tothe commencement of an independent contractor or other non-employmentrelationship with the Company or an Affiliate, such change in status shall be atermination of employment or service under this Section 7(e).

(f)                                    ***Death or Disability of Participant.***  Unless otherwise provided in the applicableNon-Qualified Option Agreement, if a Participant who is a natural personshall cease to be employed by or performing services for the Company or anyAffiliate as a result of the Participant’s death or Disability, any Non-QualifiedOption held by such Participant will becomeimmediately exercisable in full and will remain exercisable for a periodof one (1) year after the date of termination, but in no case later thanthe expiration date of such Non-Qualified Option.  Upon the death of a Participant, any Non-QualifiedOption held by such Participant may be exercised pursuant to Sections 7(c) and(d) of this Plan only by the person or persons to whom the Participant’s rightsunder the Non-Qualified Option shall pass by will or the laws of descentand distribution.

(g)                                 ***Modificationof Rights Upon Termination.***  Notwithstanding the other provisions of thisSection 7, upon a Participant’s termination of employment or other servicewith the Company and all Affiliates, the Committee may, in its sole discretion(which may be exercised at any time on or after the date of grant, includingfollowing such termination), cause Non-Qualified Options (or any part thereof)then held by such Participant to become or continue to become exercisableand/or remain exercisable following such termination of employment or service,in each case in the manner determined by the Committee; provided, however, thatno Non-Qualified Option may remain exercisable beyond its expiration date.

(h)                                 ***Breach ofConfidentiality or Non-compete Agreements.*** Notwithstanding anything in the Plan to the contrary, if a Participantmaterially breaches the terms of any confidentiality or non-compete agreemententered into with the Company or any Affiliate, whether such breach occursbefore or after termination of such Participant’s employment or other servicewith the Company or any Affiliate, the Committee, in its sole discretion, mayimmediately terminate all rights of the Participant under the Plan and anyagreements evidencing a Non-Qualified Option then held by the Participantwithout notice of any kind.

(i)                                     ***Date ofTermination of Employment or Other Service.***  AParticipant’s employment or other service will, for purposes of the Plan, bedeemed to have terminated as provided in Section 6(i) of the Plan.

(j)                                     ***No Obligation to ExerciseNon-Qualified Option.***  Thegrant of a Non-Qualified Option under the Plan shall impose no obligation onthe Participant to exercise such Non-Qualified Option.

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**8.****                                      AutomaticGrants of Director Options to Non-employee Directors**

(a)                                  ***Automatic Grants of DirectorOptions.***  Under the Plan,each Non-employee Director shall automatically be granted Director Options topurchase shares of Common Stock as follows:

(i)                                     InitialGrants of Director Options.** **Each person who is first electedor appointed to serve as a Non-employee Director after the termination date ofthe Vital Images, Inc. 1997 Director Stock Option Plan (the “Director Plan”),and who did not serve as an employee Director immediately before serving as aNon-employee Director, shall automatically be granted a Director Option on thedate of his or her initial election or appointment to the Company’s Board ofDirectors to purchase a number of shares of Common Stock equal to 9,000multiplied by a fraction, the numerator of which is the expected number ofmonths until the next annual meeting of the Company’s shareholders and thedenominator of which is twelve.

(ii)                                  AdditionalGrants of Director Options.  On theday after the date of each annual meeting of shareholders of the Company,beginning with the annual meeting of shareholders to be held in 2008, eachNon-employee Director will automatically be granted an additional DirectorOption to purchase 9,000 shares of Common Stock, but only if such person is aNon-employee Director on such date; provided, however, that only in 2008, anyNon-employee Director who has been serving as such since the Effective Date andwho received a Director Option to purchase at least 18,000 shares of CommonStock during the period from December 1, 2006 through February 28, 2007 shallautomatically be granted a Director Option on the day after the date of theannual meeting of shareholders held in 2008 to purchase 5,000 shares of CommonStock.

(iii)                               Vesting, Exercisabilityand Expiration.  All Director Optionsgranted under Section 8(a) shall vest and become exercisable as to all of theshares of Common Stock subject to such Director Options one year after the dateof grant of such Director Option.  AllDirector Options granted under this Section 8(a) shall expire five (5) yearsafter the date of grant.

(iv)                              ExercisePrice.  The exercise price ofDirector Options granted under this Section 8 shall be equal to 100% ofthe Fair Market Value of one share of Common Stock on the date of grant of theDirector Option.

(v)                                 Effectof Limited Number of Shares Under Plan. Notwithstanding the provisions of this Section 8(a), if an automaticgrant of a Director Option under this Section 8(a) would cause the numberof shares subject to outstanding Options and other Awards granted under thisPlan plus shares of Common Stock previously purchased upon exercise of Optionsand other Awards to exceed the number of shares set forth in Section 3, theneach such automatic grant shall be for that number of shares determined bydividing the total number of shares of Common Stock remaining available forgrant under Section 3 of this Plan by the number of Directors on an automaticgrant date.  Any further grants shallthen be deferred until

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such time, if any, as additional shares of CommonStock become available for grant under the Plan through action of theshareholders to increase the number of shares which may be issued under thePlan or through cancellation or expiration of Options and other Awardspreviously granted under this Plan.

(b)                                 ***Discretionary Grants.***  In addition to the Director Options grantedpursuant to Section 8(a), a Director may be granted one or more Options orother Awards under the Plan, and such Options or other Awards will be subjectto such terms and conditions, consistent with the other provisions of the Plan,as may be determined by the Committee in its sole discretion; provided,however, that any Director Option shall be subject to the following conditions:

(i)                                     ExercisePrice.  The per share price to bepaid by a Director upon exercise of a Director Option granted pursuant to thisSection 8(b) will be determined by the Committee in its discretion at the timeof the grant of the Director Option; provided, however, that such price shallnot be less than 100% of the Fair Market Value of one share of Common Stock onthe date of grant.

(ii)                                  Exercisabilityand Duration.  A Director Optiongranted pursuant to this Section 8(b) will become exercisable at such times andin such installments as may be determined by the Committee in its solediscretion at the time of grant; provided, however, that no Director Optionshall be exercisable after five (5) years from its date of grant.

(c)                                  ***Director Option Agreements.***  When a Director Option is automaticallygranted under Section 8(a), or when the Committee approves a grant of aDirector Option, the Committee shall prepare or cause to be prepared an optionagreement (“Director Option Agreement”) setting forth the terms of the DirectorOption, and such Director Option Agreement shall be signed on behalf of theCompany and by the Participant.

(d)                                 ***Exercise of Director Options.***  Except as otherwise provided in theapplicable Director Option Agreement, a Director Option may be exercised forall, or from time to time any part, of the shares of Common Stock for which itis then exercisable.  For purposes ofthis Section 8, the exercise date of a Director Option shall be the date awritten or electronic notice of exercise and full payment of the purchase priceare received by the Company in accordance with this Section 8(d) and Section8(e) below.  The purchase price for theshares of Common Stock as to which a Director Option is exercised shall be paidto the Company in cash or its equivalent, such as by check or wire transfer or,if provided in the Director Option Agreement or with the consent of theCommittee:  (i) in shares of Common Stockhaving a Fair Market Value equal to the aggregate Exercise Price of the sharesof Common Stock being purchased and satisfying such other requirements as maybe imposed by the Committee; provided, that such shares were then purchased onthe open market or have been held by the Participant for at least six months(or such other period as established from time to time by the Committee inorder to avoid adverse accounting treatment under generally accepted accountingprinciples); (ii) partly in cash and partly in such shares; or (iii) if thereis a public market for the

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shares of Common Stock at such time, through the deliveryof irrevocable instructions to a broker to sell shares of Common Stock obtainedupon the exercise of the Director Option and to deliver promptly to the Companyan amount out of the proceeds of such sale equal to the aggregate ExercisePrice for the shares being purchased.

(e)                                  ***Manner of Exercise of DirectorOptions.***  A DirectorOption shall be exercised only by the Participant (i) delivering a completedand signed written or electronic notice of exercise to the Company in the formprescribed by the Company specifying the number of shares of Common Stock as towhich the Director Option is being exercised; (ii) delivering the originalDirector Option Agreement to the Company; and (iii) paying to the Company thefull amount of the Exercise Price for the number of shares of Common Stock withrespect to which the Director Option is being exercised as provided in Section8(d) above.  When shares of Common Stockare issued to the Participant upon the exercise of that Participant’s DirectorOption, the fact of such issuance shall be noted on the Director OptionAgreement by the Company before the Director Option Agreement is returned tothe Participant.  When all shares ofCommon Stock covered by the Director Option Agreement have been issued by theCompany to the Participant or when the Director Option expires, the Participantshall deliver the Director Option Agreement to the Company, which shall cancelit.  After the receipt by the Company ofthe written or electronic notice of exercise and payment in full of theExercise Price in accordance with Sections 8(d) and 8(e), the Company shalldeliver or cause to be delivered to the Participant exercising the DirectorOption stock certificates evidencing the number of shares with respect to whichthe Director Option has been exercised, issued in the Participant’s name;provided, however, that such delivery shall be deemed effective for allpurposes when the Company or its stock transfer agent (if any) has depositedsuch stock certificates in the United States mail, postage prepaid, addressedto the Participant at the address specified in the written or electronic noticeof exercise.  Director Option Agreementsmay be electronically delivered by the Participant to the Company under thisprovision.

(f)                                    ***Termination of Status as a Director.***  Subject to the provisions ofSections 8(g) and 8(h), if a Director ceases to serve as a Director, he orshe may, but only within three (3) months after the date he or she ceases to bea Director of the Company, exercise his or her Director Option to the extentthat he or she was entitled to exercise it at the date of suchtermination.  Any portion of a DirectorOption that is not exercisable on the date a Director ceases to be a Directorof the Company, and any portion of a Director Option which the Director wasentitled to exercise that is not exercised within the time specified herein,shall immediately and automatically terminate and be forfeited, and neithersuch Director nor any of the Director’s heirs, personal representatives, successorsor assigns shall have any rights with respect to such Director Option.

(g)                                 ***Disability of Director.***  Notwithstanding the provisions of Section8(f) above, if a Director is unable to continue his or her service as aDirector with the Company as a result of his or her Disability, he or she may,but only within one (1) year after the date of termination of such service,exercise his or her Director Option to

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the extent he or she was entitled to exercise it atthe date of such termination.  Anyportion of a Director Option that is not exercisable on the date a Directorceases to be a Director of the Company, and any portion of a Director Optionwhich the Director was entitled to exercise that is not exercised within thetime specified herein, shall immediately and automatically terminate and beforfeited, and neither such Director nor any of the Director’s heirs, personalrepresentatives, successors or assigns shall have any rights with respect tosuch Director Option.

(h)                                 ***Death of Director.***  Upon the death of a Director holding aDirector Option:

(i)                                     duringthe term of the Director Option when such Director was, at the time of his orher death, a Director of the Company and who shall have been in ContinuousStatus as a Director since the date of grant of the Director Option, theDirector Option may be exercised, at any time within one (1) year following thedate of death, by the person who acquired the right to exercise such DirectorOption by bequest or inheritance, but only to the extent of the right to exercisethat existed at the date of death;

(ii)                                  withinthree (3) months after the termination of Continuous Status as a Director, theDirector Option may be exercised, at any time within three (3) months followingthe date of death, by such Director’s estate or by a person who acquired theright to exercise the Director Option by bequest or inheritance, but only tothe extent of the right to exercise that had accrued at the date of terminationof Continuous Status as a Director; and

(iii)                               any portion of a DirectorOption that is not exercisable on the date of a Director’s death, and anyportion of a Director Option which the Director was entitled to exercise thatis not exercised within the time specified in Section 8(h)(i) orSection 8(h)(ii), shall immediately and automatically terminate and beforfeited, and neither such Director nor any of the Director’s heirs, personalrepresentatives, successors or assigns shall have any rights with respect tosuch Director Option.

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**9.****                                     ****Terms and Conditions ofStock Appreciation Rights**

(a)                                  ***Grants.***  The Committee may grant a Stock AppreciationRight independent of an Option or in connection with an Option or a portionthereof.  Any grant of a StockAppreciation Right under the Plan shall be evidenced by an Award agreement insuch form as the Committee shall from time to time approve and which shall setforth the terms and conditions of the Stock Appreciation Right.  The Committee may impose such terms andconditions upon any Stock Appreciation Right as it deems fit.  A Stock Appreciation Right granted inconnection with an Option or a portion thereof (i) may be granted at the timethe related Option is granted or at any time before the exercise orcancellation of the related Option, (ii) shall cover the same number of sharesof Common Stock covered by the Option (or such fewer number of shares of CommonStock as the Committee may determine), and (iii) shall be subject to the sameterms and conditions as such Option except for such additional limitations asare contemplated by this Section 9 (or such additional limitations as may beincluded in the Award agreement evidencing such Stock Appreciation Right).

(b)                                 ***Terms.***  The exercise price per share of Common Stockof a Stock Appreciation Right shall be an amount determined by the Committeebut in no event shall such amount be less than the Fair Market Value of a shareof Common Stock on the date the Stock Appreciation Right is granted.  In addition, in the case of a StockAppreciation Right granted in conjunction with an Option or a portion thereof,the exercise price shall not be less than the Exercise Price of the relatedOption.  Each Stock Appreciation Rightgranted independent of an Option shall entitle a Participant upon exercise toan amount equal to (i) the excess of (A) the Fair Market Value on the exercisedate of one share of Common Stock over (B) the exercise price per share, times(ii) the number of shares of Common Stock covered by the Stock AppreciationRight.  Each Stock Appreciation Rightgranted in conjunction with an Option or a portion thereof shall entitle aParticipant to surrender to the Company the unexercised Option or any portionthereof and to receive from the Company in exchange therefor an amount equal to(I) the excess of (x) the Fair Market Value on the exercise date of one shareof Common Stock over (y) the Exercise Price per share of Common Stock, times(II) the number of shares of Common Stock covered by the Option, or portionthereof, which is surrendered.  Paymentshall be made in shares of Common Stock or in cash, or partly in shares andpartly in cash (any such shares of Common Stock valued at such Fair MarketValue), all as set forth in the Award agreement evidencing such StockAppreciation Right or as otherwise determined in the discretion of the Committee.  Stock Appreciation Rights may be exercisedfrom time to time upon actual receipt by the Company of a written or electronicnotice of exercise stating the number of shares of Common Stock with respect towhich the Stock Appreciation Right is being exercised.  The date a notice of exercise is received bythe Company shall be the exercise date. No Stock Appreciation Right shall be exercisable after five (5) yearsfrom its date of grant.

(c)                                  ***Termination of Employment orService.***  If a Participantwho holds a Stock Appreciation Right shall cease to be employed by orperforming services for the Company or any Affiliate for any reason other than deathor Disability, unless the

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applicable Award agreement provides otherwise, such Stock AppreciationRight shall immediately and automatically terminate and be forfeited, whetheror not exercisable, and neither such Participant nor any of the Participant’sheirs, personal representatives, successors or assigns shall have any rightswith respect to such Stock Appreciation Right; provided, however, that if suchtermination is due to any reason other than termination by the Company or anyAffiliate for Cause, all Stock Appreciation Rights then held by suchParticipant will remain exercisable to the extent they were exercisable as ofsuch termination for a period of three (3) months after such termination (butin no event after the expiration date of any such Stock AppreciationRight).  Unless the applicable Awardagreement provides otherwise, if an independent contractor or othernon-employment relationship between the Participant and the Company or anAffiliate is terminated due to the commencement of an employment relationshipwith the Company or an Affiliate, or if an employment relationship between theParticipant and the Company or an Affiliate is terminated due to thecommencement of an independent contractor or other non-employment relationshipwith the Company or an Affiliate, such change in status shall be a terminationof employment or service under this Section 9(c).

(d)                                 ***Death or Disability of Participant.***  Unless otherwise provided in the applicableAward agreement, if a Participant who is a natural person shall cease to beemployed by or performing services for the Company or any Affiliate as a resultof the Participant’s death or Disability, any Stock Appreciation Right held bysuch Participant will become immediatelyexercisable in full and will remain exercisable for a period ofone (1) year after the date of termination, but in no case later than theexpiration date of such Stock Appreciation Right.  Upon the death of a Participant, any StockAppreciation Right may be exercised pursuant to Section 9(b) of this Plan onlyby the person or persons to whom the Participant’s rights under the StockAppreciation Right shall pass by will or the laws of descent and distribution.

(e)                                  ***Modificationof Rights Upon Termination.***  Notwithstanding the other provisions of thisSection 9, upon a Participant’s termination of employment or other servicewith the Company and all Affiliates, the Committee may, in its sole discretion(which may be exercised at any time on or after the date of grant, includingfollowing such termination), cause Stock Appreciation Rights (or any partthereof) then held by such Participant to become or continue to becomeexercisable and/or remain exercisable following such termination of employmentor service, in each case in the manner determined by the Committee; provided,however, that no Stock Appreciation Right may remain exercisable beyond itsexpiration date.

(f)                                    ***Breach ofConfidentiality or Non-compete Agreements.*** Notwithstanding anything in the Plan to the contrary, if a Participantmaterially breaches the terms of any confidentiality or non-compete agreemententered into with the Company or any Affiliate, whether such breach occursbefore or after termination of such Participant’s employment or other servicewith the Company or any Affiliate, the Committee, in its sole discretion, mayimmediately terminate all rights of the Participant under the Plan and anyagreements evidencing a Stock Appreciation Right then held by the Participantwithout notice of any kind.

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(g)                                 ***Date ofTermination of Employment or Other Service.***  AParticipant’s employment or other service will, for purposes of the Plan, bedeemed to have terminated as provided in Section 6(i) of the Plan.

(h)                                 ***No Obligationto Exercise Stock Appreciation Right.***  The grant of a StockAppreciation Right under the Plan shall impose no obligation on the Participantto exercise such Stock Appreciation Right.

**10.****                              ****Awards of Restricted Stock**

(a)                                  ***Grant.***  Awards of Restricted Stock subject toforfeiture and transfer restrictions may be granted by the Committee under thePlan.  Any Awards of Restricted Stockshall be evidenced by an Award agreement in such form as the Committee shallfrom time to time approve and which shall set forth the terms and conditions ofthe Award of Restricted Stock.  Subjectto the provisions of the Plan, the Committee shall determine the number ofshares of Restricted Stock to be granted to each Participant; the duration ofany period during which, and the conditions, if any, under which, the RestrictedStock may be forfeited to the Company; and the other terms and conditions ofsuch Awards.  The Committee may determinea period of time during which the Participant receiving the Award of RestrictedStock must remain in the continuous employment of the Company in order for theforfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during anysuch restricted period in installments with respect to specified portions ofthe shares of Restricted Stock covered by the Award of Restricted Stock.  The Committee may also impose performance orother conditions that will subject the shares subject to the Award ofRestricted Stock to forfeiture and transfer restrictions.  The Committee may, at any time, in itsdiscretion, waive all or any part of any restrictions applicable to any or alloutstanding Awards of Restricted Stock.

(b)                                 ***Transfer Restrictions.***  Shares of Restricted Stock may not be sold,assigned, transferred, pledged or otherwise encumbered, except as provided inthe Plan or the applicable Award agreement. At the time of the grant of an Award of Restricted Stock, a stockcertificate representing the number of shares of Restricted Stock awardedthereunder shall be registered in the name of the Participant and held by theCompany.  Such stock certificate may beara legend describing the conditions of the Restricted Stock Award.  Unless the Award agreement evidencing anAward of Restricted Stock or the Committee provides otherwise, the Participantreceiving the Award of Restricted Stock shall have all rights of a shareholderwith respect to the shares of Restricted Stock subject to such Award, includingthe right to receive any dividends and the right to vote such shares, subjectto the following restrictions:  (i) theParticipant receiving the Award of Restricted Stock shall not be entitled todelivery of the stock certificate until the expiration of the restricted periodand the fulfillment of any other restrictive conditions set forth in theapplicable Award agreement; (ii) none of the shares of Common Stock subject tothe Award of Restricted Stock may be sold, assigned, transferred, pledged,hypothecated or otherwise encumbered or disposed of during such restrictedperiod or until after the fulfillment of any such other restrictive condition;and (iii) all of the shares of Restricted Stock shall be forfeited and allrights of the Participant to such shares shall terminate, without 

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any further obligation on the part of the Company, unless the Participantremains in the continuous employment of the Company for the entire restrictedperiod.  Any shares of Common Stock, anyother securities of the Company and any other property (except for cashdividends) distributed with respect to the shares subject to an Award ofRestricted Stock shall be subject to the same restrictions, terms andconditions as such shares.  After thelapse or termination of the restrictions of an Award of Restricted Stock, or atsuch earlier time as otherwise determined by the Committee, a stock certificateevidencing the shares of Common Stock subject to the Award of Restricted Stockthat bears no legend describing the conditions of an Award of Restricted Stockshall be delivered to the Participant or his or her beneficiary or estate, asthe case may be.

(c)                                  ***Dividends.***  Dividends or dividend equivalents paid on anyshares of Restricted Stock may be paid directly to the Participant, withheld bythe Company subject to vesting of the Restricted Stock pursuant to the terms ofthe applicable Award agreement, or may be reinvested in additional Awards ofRestricted Stock, as determined by the Committee in its discretion.

(d)                                 ***Termination of Employment orService.***  If a Participantwho holds a Restricted Stock Award shall cease to be employed by or performingservices for the Company or any Affiliate for any reason other than death orDisability prior to the vesting of shares of Restricted Stock granted to suchParticipant, unless the applicable Award agreement provides otherwise, suchRestricted Stock Award shall immediately and automatically terminate and beforfeited and neither such Participant nor any of the Participant’s heirs,personal representatives, successors or assigns shall have any rights withrespect to such unvested Restricted Stock Award.  Unless the applicable Award agreementprovides otherwise, if an independent contractor or other non-employmentrelationship between the Participant and the Company or an Affiliate isterminated due to the commencement of an employment relationship with theCompany or an Affiliate, or if an employment relationship between theParticipant and the Company or an Affiliate is terminated due to thecommencement of an independent contractor or other non-employment relationshipwith the Company or an Affiliate, such change in status shall be a terminationof employment or service under this Section 10(d).

(e)                                  ***Death or Disability of Participant.***  Unless otherwise provided in the applicableAward agreement, if a Participant who is a natural person shall cease to beemployed by or performing services for the Company or any Affiliate as a resultof the Participant’s death or Disability prior to the vesting of shares subjectto the Restricted Stock Award granted to such Participant, all of such sharesshall become fully vested.  Upon thedeath of a Participant, the person entitled to any such shares of RestrictedStock shall be the person or persons to whom the Participant’s rights under theRestricted Stock Award shall pass by will or the laws of descent and distribution.

(f)                                    ***Modificationof Rights Upon Termination.***  Notwithstanding the other provisions of thisSection 10, upon a Participant’s termination of employment or otherservice with the Company and all Affiliates, the Committee may, in its solediscretion (which may be exercised at any time on or after the date of grant,including 

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following such termination), cause RestrictedStock Awards (or any part thereof) then held by such Participant to become orcontinue to become vested and following such termination of employment orservice, in each case in the manner determined by the Committee.

(g)                                 ***Breach ofConfidentiality or Non-compete Agreements.*** Notwithstanding anything in the Plan to the contrary, if a Participantmaterially breaches the terms of any confidentiality or non-compete agreemententered into with the Company or any Affiliate, whether such breach occursbefore or after termination of such Participant’s employment or other servicewith the Company or any Affiliate, the Committee, in its sole discretion, mayimmediately terminate all rights of the Participant under the Plan and anyagreements evidencing a Restricted Stock Award then held by the Participantwithout notice of any kind.

(h)                                 ***Date ofTermination of Employment or Other Service.***  A Participant’semployment or other service will, for purposes of the Plan, be deemed to haveterminated as provided in Section 6(i) of the Plan.

(i)                                     ***Other Provisions.***  Each Award agreement relating to an Award ofRestricted Stock authorized under this Section 10 may contain such otherprovisions as the Committee shall deem advisable including, but not limited to,a requirement that shares of Common Stock acquired under an Award of RestrictedStock be subject to a restriction on the Participant’s ability to transfer theshares to third parties without the consent of the Company.

**11.****                              ****Other Awards**

(a)                                  ***Other Stock-Based Awards.***  The Committee, in its sole discretion, maygrant Awards of shares of Common Stock and Awards that are valued in whole orin part by reference to, or are otherwise based on, shares of Common Stock oron the Fair Market Value thereof (“Other Stock-Based Awards”).  Such Other Stock-Based Awards shall be insuch form, and dependent on such conditions, as the Committee shall determineincluding, without limitation, the right to receive, or vest with respect to,one or more shares of Common Stock (or the equivalent cash value of suchshares) upon the completion of a specified period of service, the occurrence ofan event and/or the attainment of performance objectives.  Other Stock-Based Awards may be granted aloneor in addition to any other Awards granted under the Plan.  Subject to the provisions of the Plan, theCommittee shall determine the number of shares of Common Stock to be awarded toa Participant under (or otherwise related to) such Other Stock-Based Awards;whether such Other Stock-Based Awards shall be settled in cash, shares ofCommon Stock or a combination of cash and such shares; and all other terms andconditions of such Awards (including, without limitation, the vestingprovisions thereof and provisions ensuring that all shares so awarded andissued shall be fully paid and non-assessable). Any Other Stock-Based Awards shall be evidenced by an Award agreement insuch form as the Committee shall from time to time approve and which shall setforth the terms and conditions of the Other Stock-Based Award.  Unless the applicable Award agreementprovides otherwise, if a Participant who holds an Other Stock-Based Award shallcease to be employed by or performing services for the Company or an Affiliatefor any reason, such Other Stock-Based 

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Award shall be treated by the Committee as though it is either aNon-Qualified Option or a Restricted Stock Award, as the Committee shalldetermine in its discretion.

(b)                                 ***Other Cash-Based Awards.***  In addition to the Awards described above,and subject to the terms of the Plan, the Committee may grant such otherincentives denominated in cash and payable in cash under the Plan as theCommittee determines to be in the best interests of the Company and subject tosuch other terms and conditions as it deems appropriate (“Other Cash-BasedAwards”).  Any Other Cash-Based Awardsshall be evidenced by an Award agreement in such form as the Committee shallfrom time to time approve and which shall set forth the terms and conditions ofthe Other Cash-Based Award.  Unless theapplicable Award agreement provides otherwise, if a Participant who holds anOther Cash-Based Award shall cease to be employed by or performing services forthe Company or an Affiliate for any reason, such Other Cash-Based Award shallbe treated as though it is a Stock Appreciate Right or otherwise as theCommittee shall determine in its discretion.

**12.****                               Performance-BasedAwards**.

(a)                                  ***Performance-Based Awards.***  Notwithstanding anything to the contraryherein, the Committee may grant performance-based Options, Awards of RestrictedStock, Other Stock-Based Awards and Other Cash-Based Awards to Participants (“Performance-BasedAwards”).  Any such Awards granted toParticipants who may be “covered employees” under Section 162(m) of the Code orany successor section thereto shall be consistent with the provisionsthereof.  In such cases, a Participant’sPerformance-Based Award shall be determined based on the attainment of writtenperformance goals approved by the Committee for a performance periodestablished by the Committee (i) when the outcome for that performance periodis substantially uncertain and (ii) by the earlier of (A) three (3) monthsafter the commencement of the performance period to which the performance goalrelates or (B) the number of days which is equal to twenty-five percent (25%)of the relevant performance period.

(b)                                 ***Performance Goals.***  The performance goals referred to in Section12(a) must be objective and shall be based upon one or more of the followingcriteria:  (i) consolidated earningsbefore or after taxes (including earnings before interest, taxes, depreciationand amortization); (ii) net income; (iii) operating income;(iv) earnings per share; (v) book value per share of Common Stock;(vi) return on shareholders’ equity; (vii) expense management;(viii) return on investment; (ix) improvements in capital structure;(x) profitability of an identifiable business unit or product; (xi) maintenanceor improvements of profit margins; (xii) stock price; (xiii) marketshare; (xiv) revenues or sales; (xv) costs; (xvi) cash flow;(xvii) working capital; (xviii) return on assets; (xix) assetturnover; (xx) inventory turnover; (xxi) economic value added(economic profit); and (xxii) total shareholder return.  The foregoing criteria may relate to theCompany, one or more of its Parents or Subsidiaries or one or more of itsdivisions or units, or any combination of the foregoing, and may be applied onan absolute basis and/or be relative to one or more peer group companies orindices, or any combination thereof, all as the Committee shall determine.  In addition, to the degree consistent 

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with Section 162(m) of the Code (or any successor sectionthereto), the performance goals may be calculated without regard to thenegative effect of unusual or nonrecurring items, extraordinary items,discontinued operations or cumulative effects of accounting changes.  The Committee shall determine whether, withrespect to a performance period, the applicable performance goals have been metwith respect to a given Participant who may be a covered employee and, if theyhave, shall so certify and ascertain the amount of the applicablePerformance-Based Award.  No Performance-BasedAwards will be paid for such performance period until such certification ismade by the Committee.  The amount of thePerformance-Based Award actually paid to a given Participant may be less thanthe amount determined by the applicable performance goal formula, at thediscretion of the Committee.  The amountof the Performance-Based Award determined by the Committee for a performanceperiod shall be paid to the Participant at such time as determined by theCommittee in its sole discretion after the end of such performance period.

**13.****                              ****Adjustments Upon CertainEvents**

Notwithstanding any otherprovisions in the Plan to the contrary, the following provisions shall apply toall Awards granted under the Plan:

(a)                                  ***Generally.***  Upon any change in the outstanding shares ofCommon Stock after the Effective Date by reason of any stock dividend, stocksplit, reverse stock split, reclassification, combination, exchange of sharesor other similar recapitalization of the Company, there shall be an appropriateadjustment to (i) the number or kind of shares of Common Stock or othersecurities issued or reserved for issuance pursuant to the Plan or pursuant tooutstanding Awards, (ii) the Exercise Price of any Option or the exerciseprice of any Stock Appreciation Right, and/or (iii) any other affectedterms of such Awards.  Notwithstandingthe foregoing, no fractional shares shall be issued or paid for.  No adjustment shall be made under thisSection 13(a) upon the issuance by the Company of any warrants, rights oroptions to acquire additional Common Stock or of securities convertible intoCommon Stock unless such warrants, rights, options or convertible securitiesare issued to all shareholders of the Company on a proportionate basis.

(b)                                 ***Change in Control.***  Unless otherwise provided by the Committeeeither in the applicable Award agreement at the time of grant or at any timeafter the grant of an Award under the Plan (including pursuant toSection 13(e) before the occurrence of a sale, merger, consolidation, reorganization,liquidation, dissolution or other “Change in Control” (as defined below)), inthe event of a Change in Control, the following shall occur immediately as ofthe effective date of such Change in Control with respect to any and all Awardsoutstanding as of the effective date of such Change in Control:  (i) any and all Awards granted hereunderwill be, as nearly as may reasonably be, automatically converted into the sametype of Award to acquire the kind and amount of shares of stock or other securitiesor property (including cash) which the Participant would have owned or havebeen entitled to receive as of the effective date of the Change in Control hadthe Awards been exercised or realized in full immediately before the effectivedate of the Change in Control; (ii) all Options will become immediatelyexercisable in full and will remain exercisable for the remainder of theirterms, 

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regardless of whether the Participants to whom such Options have beengranted remain in the employ or service of the Company or any Affiliate; (iii)all outstanding Awards of Restricted Stock will become immediately fully vestedregardless of whether the Participants to whom such Awards have been grantedremain in the employ or service of the Company or any Affiliate; (iv) all otheroutstanding Awards will vest and/or continue to vest in the manner determinedby the Committee and set forth in the applicable Award agreement evidencingsuch Awards; and (v) appropriate adjustment shall be made in the application ofthe provisions of all outstanding Awards with respect to the rights andinterests thereafter of each Participant, to the end that the provisions setforth in each Award shall thereafter correspondingly be made applicable, asnearly as may reasonably be, in relation to any shares of stock or othersecurities or property (including cash) thereafter deliverable under the Award.

(c)                                  ***Definition of Change of Control.***  For purposes of this Section 13, “Change inControl” means:

(i)                                     thesale, lease, exchange or other transfer, directly or indirectly, of all orsubstantially all of the assets of the Company (in one transaction or in aseries of related transactions) to a person or entity that is not controlled bythe Company;

(ii)                                  theapproval by the Company’s shareholders of any plan or proposal for theliquidation or dissolution of the Company;

(iii)                               a merger orconsolidation to which the Company is a party if the shareholders of theCompany immediately prior to the effective date of such merger or consolidationhave, 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 date of such merger or consolidation ofsecurities of the surviving company representing (A) more than 50%, butnot more than 80%, of the combined voting power of the surviving corporation’sthen outstanding securities ordinarily having the right to vote at elections ofdirectors, unless such merger or consolidation has been approved in advance bythe Incumbent Directors (as defined in Section 7(d) below), or (B) fiftypercent (50%) or less of the combined voting power of the surviving corporation’sthen outstanding securities ordinarily having the right to vote at elections ofdirectors (regardless of any approval by the Incumbent Directors);

(iv)                              anyperson becomes after the Effective Date of the Plan the “beneficial owner” (asdefined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (A)twenty percent (20%) or more, but not fifty percent (50%) or more, of thecombined voting power of the Company’s outstanding securities ordinarily havingthe right to vote at elections of directors, unless the transaction resultingin such ownership has been approved in advance by the Incumbent Directors, or(B) fifty percent (50%) or more of the combined voting power of the Company’s 

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outstanding securities ordinarily having the right to vote at electionsof directors (regardless of any approval by the Incumbent Directors);

(v)                                 theIncumbent Directors cease for any reason to constitute at least a majority ofthe Board; or

(vi)                              anyother change in control of the Company of a nature that would be required to bereported pursuant to Section 13 or 15(d) of the Exchange Act, whether or notthe Company is then subject to such reporting requirements.

The provisions of this Section shall similarly apply to successivetransactions of the types described in Sections 13(c)(i) through (vi).

(d)                                 ***Incumbent Directors.***  For purposes of this Section 13, “IncumbentDirectors” of the Company means the individuals who are members of the Board onthe Effective Date of the Plan and any individual who subsequently becomes amember of the Board whose election or nomination for election by the Company’sshareholders was approved by a vote of at least a majority of the IncumbentDirectors (either by specific vote or by approval of the Company’s proxystatement in which such individual is named as a nominee for director withoutobjection to such nomination).

(e)                                  ***Additional Adjustments of Awards.***  The Committee shall have the discretion,exercisable without the consent of any Participant affected thereby if notprohibited by the applicable Award Agreement, at any time before a sale,merger, consolidation, reorganization, liquidation, dissolution or other Changein Control transaction, to take such further action as it determines to benecessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to)establishing, amending or waiving the type, terms, conditions or duration of,or restrictions on, Awards so as to provide for earlier, later, extended oradditional time for exercise; paying cash or other consideration in exchangefor all or part of such Awards; and lifting restrictions and othermodifications.  The Committee may takesuch actions with respect to all Participants, to certain categories ofParticipants or to only individual Participants.  The Committee may take such action before orafter granting Awards to which the action relates and before or after anypublic announcement with respect to such sale, merger, consolidation,reorganization, liquidation, dissolution or Change in Control that is thereason for such action.  The grant of anAward under the Plan shall not affect in any way the right or power of theCompany to make adjustments, reclassifications, reorganizations or changes ofits capital or business structure or to merge or to consolidate or to dissolve,liquidate or sell, or transfer all or any part of its business or assets.

(f)                                    ***Limitation on Change in ControlPayments.***  Notwithstandinganything in this Plan to the contrary, if, with respect to a Participant, theacceleration of the vesting of an Award as provided in Section 13(e), thepayment of cash in exchange for all or part of an Award as provided in Section13(e) or any other adjustment to an Award pursuant to Section 13(e) (whichacceleration, payment or adjustment could be deemed a “payment” within themeaning of 

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Section 280G(b)(2) of the Code), together with any other “payments”which such Participant has the right to receive from the Company or anycorporation that is a member of an “affiliated group” (as defined inSection 1504(a) of the Code without regard to Section 1504(b) of theCode) of which the Company is a member, would constitute a “parachute payment”(as defined in Section 280G(b)(2) of the Code), then the “payments” tosuch Participant pursuant to Section 13(e) of the Plan will be reduced to thelargest amount as will result in no portion of such “payments” being subject tothe excise tax imposed by Section 4999 of the Code; provided, however, that ifa Participant is subject to a separate agreement with the Company or anAffiliate that expressly addresses the potential application ofSection 280G or Section 4999 of the Code (including, withoutlimitation, that “payments” under such agreement or otherwise will not bereduced or that the Participant will have the discretion to determine which “payments”will be reduced), then the limitations of this Section 13(f) will not apply,and any “payments” to a Participant pursuant to Section 13(e) of the Plan willbe treated as “payments” arising under such separate agreement.

**14.****                               SharesAcquired for Investment**

Shares of Common Stock acquired by a Participant underthis Plan shall be acquired by the Participant for investment and withoutintention of resale unless, in the opinion of counsel to the Company, suchshares may be purchased without any investment representation.  Where an investment representation is deemednecessary, the Committee may require a written representation to that effect bythe Participant as a condition of a Participant exercising an Option orotherwise obtaining shares of Common Stock pursuant an Award granted under thisPlan, and the Committee may place an appropriate legend on the stockcertificates evidencing the shares of Common Stock so issued indicating thatsuch shares have not been registered under federal or state securities laws anddescribing the restrictions on transfer. Each Award shall be subject to the requirement that if, at any time, theCommittee shall determine in its discretion that the listing, registration orqualification of the shares of Common Stock subject to the Award upon anysecurities exchange or under any state or federal law, or the consent orapproval of any governmental regulatory body, if necessary or desirable as acondition of, or in connection with, the granting of such Award or the issuanceor purchase of shares of Common Stock thereunder, then such Award shall not begranted or exercised in whole or in part unless such listing, registration,qualification, consent or approval shall have been effected or obtained free ofany conditions not acceptable to the Committee.

**15.****                              ****No Right to Employment,Service as a Director or Awards**

The granting of an Award under the Plan shall imposeno obligation on the Company or any Affiliate to continue the employment of aParticipant and shall not lessen or affect the Company’s or the Affiliate’s rightto terminate the employment of such Participant.  Nothing in the Plan will interfere with orlimit in any way the right of the Company, the Board or the Company’sshareholders to terminate the directorship of any Director at any time, norconfer upon any Director any right to continue to serve as a director of theCompany.  No Participant or other personshall have any claim to be granted any Award, and there is no obligation foruniform treatment of Participants or holders or beneficiaries of Awards.  The terms and conditions of Awards and theCommittee’s determinations and interpretations with respect thereto need not bethe same with respect to each Participant.

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**16.****                               OtherBenefit and Compensation Programs**

Payments and other benefits received by a Participantunder an Award shall not be deemed a part of a Participant’s regular, recurringcompensation for purposes of any termination, indemnity or severance pay lawsand shall not be included in, nor have any effect on, the determination ofbenefits under any other employee benefit plan, contract or similar arrangementprovided by the Company or an Affiliate, unless expressly so provided by suchother plan, contract or arrangement or the Committee determines that an Awardor portion of an Award should be included to reflect competitive compensationpractices or to recognize that an Award has been made in lieu of a portion ofcompetitive cash compensation.

**17.****                              ****Successors and Assigns**

The Plan shall be binding on all successors andassigns of the Company and a Participant including, without limitation, theestate of such Participant and the executor, administrator or trustee of suchestate, or any receiver or trustee in bankruptcy or representative of theParticipant’s creditors.

**18.****                              ****Nontransferability of Awards;Designation of Beneficiary**

(a)                                  ***Nontransferability.***  No Award or interest in an Award may be sold,assigned, pledged (as collateral for a loan or as security for the performanceof an obligation or for any other purpose) or transferred by the Participant ormade subject to attachment or similar proceedings otherwise than by will or bythe applicable laws of descent and distribution, except to the extent aParticipant designates one or more beneficiaries on a Company-approved form, asset forth in Section 18(b) of this Plan, who may exercise the Award orreceive payment under the Award after the Participant’s death.  During a Participant’s lifetime, an Award maybe exercised only by the Participant.

(b)                                 ***Designation of Beneficiary.***  A Participant may designate a beneficiary tosucceed to the Participant’s Awards under the Plan in the event of theParticipant’s death by filing a beneficiary form with the Company and, upon thedeath of the Participant, such beneficiary shall succeed to the rights of theParticipant to the extent permitted by law and the terms of this Plan and theapplicable Award agreement.  In theabsence of a validly designated beneficiary who is living at the time of theParticipant’s death, the Participant’s executor or administrator of the Participant’sestate shall succeed to the Awards, which shall be transferable by will orpursuant to laws of descent and distribution.

**19.****                              ****Amendments or Termination**

The Board may amend,alter or discontinue the Plan, but no amendment, alteration or discontinuationshall be made without the consent of a Participant if such action woulddiminish any of the rights of the Participant under any Award theretoforegranted to such Participant under the Plan; *provided,however,*that the Committee may amend the Plan in such manner as itdeems necessary to permit the granting of Awards meeting the requirements ofthe Code or other applicable laws.

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**20.****                              ****International Participants**

With respect toParticipants who reside or work outside the United States of America, the Committeemay, in its sole discretion, amend the terms of the Plan or adopt suchmodifications, procedures or subplans with respect to such Participants as arenecessary or desirable to ensure the viability of the benefits of the Plan,comply with applicable foreign laws or obtain more favorable tax or othertreatment for a Participant, the Company or an Affiliate; provided, however,that no such changes shall apply to the Awards to Participants who may be “coveredemployees” under Section 162(m) of the Code or any successor thereto unlessconsistent with the provisions thereof.

**21.****                              ****General**

(a)                                  ***Issuance of Shares of Common Stock****.* Notwithstanding any other provision of the Plan, the Company shall haveno obligation to issue or deliver any shares of Common Stock under an Awardgranted under the Plan or make any other distribution of benefits under thePlan unless, in the opinion of the Company’s counsel, such issuance, deliveryor distribution would comply with all applicable laws (including, withoutlimitation, the requirements of the Securities Act of 1933, as amended, or anysuccessor thereto (the “Securities Act”) or the laws of any state or foreignjurisdiction) and the applicable requirements of any securities exchange orsimilar entity.  The Company shall beunder no obligation to any Participant to register for offering or resale or toqualify for an exemption from registration under the Securities Act, or toregister or qualify under the laws of any state or foreign jurisdiction, anyAwards, shares of Common Stock, security or interest in a security paid orissued under, or created by, the Plan, or to continue in effect any suchregistrations or qualifications if made. The Company may issue stock certificates evidencing shares of CommonStock with such legends and subject to such restrictions on transfer and stoptransfer instructions as counsel for the Company deems necessary or desirablefor compliance by the Company with federal, state and foreign securitieslaws.  The Company may also require suchother action or agreement by the Participants as may from time to time benecessary to comply with applicable securities laws.

(b)                                 ***Stock Certificates.***  To the extent this Plan or any applicableAward agreement provides for the issuance of stock certificates to reflect theissuance of shares of Common Stock, the issuance may be effected on anoncertificated basis, to the extent not prohibited by applicable law or theapplicable rules of any stock exchange or market on which such shares arequoted.

(c)                                  ***No Rights as a Shareholder.***  Unless otherwise provided by the Committee orin the Plan or an Award agreement evidencing an Award or in any other writtenagreement between a Participant and the Company or an Affiliate, no Award shallentitle the Participant to any cash dividend, voting or other right of ashareholder unless and until the date of issuance under the Plan of any sharesof Common Stock that are subject to such Award.

(d)                                 ***No Trust or Fund.***  The Plan is intended to constitute an “unfunded”plan.  Nothing contained herein shallrequire the Company to segregate any monies, other property, or shares ofCommon Stock, or to create any trusts, or to make any 

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special deposits for any immediate or deferred amounts payable to anyParticipant, and no Participant shall have any rights that are greater thanthose of a general unsecured creditor of the Company.

(e)                                  ***Severability.***  If any provision of the Plan or any Awardagreement shall be held illegal or invalid for any reason, the illegality orinvalidity shall not affect the remaining parts of the Plan or Award agreement,and such Plan or Award agreement shall be construed and enforced as if theillegal or invalid provision had not been included.

(f)                                    ***Choice of Law.***  The validity, construction, interpretation,administration and effect of the Plan, and rights relating to the Plan and toAwards granted under the Plan, shall be governed by the substantive laws, butnot the choice of law rules, of the State of Minnesota.

**22.****                              ****Effective Date**

The Plan shall be effective on March 9, 2006 (the “EffectiveDate”), which is the date it was approved by the Board.  The Plan was approved by the Company’sshareholders on May 4, 2006.  It wasamended by the Board of Directors on February 2, 2007.

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