**EXHIBIT10.4**

**MEDICALCV, INC.AMENDED AND RESTATED 2001 EQUITY INCENTIVE PLAN**

**(As Amended on April 20, 2007)**

**SECTION 1**

**DEFINED TERMS**

In addition to the other definitions contained herein, the followingdefinitions shall apply:

1.1           *Award*.  The term “Award” shall mean any award orbenefit granted in accordance with the terms of the Plan.  Awards under the Plan may be in the form of (i) StockOptions; (ii) Restricted Stock; (iii) Performance Awards; (iv) RestrictedStock Units; and/or (v) Tax Offset Payments.  The terms and conditions of the Award shallbe set forth in an “Award Agreement.”

1.2           *Board*.  The term “Board” shall mean the Board ofDirectors of the Company.

1.3           *Change inControl*.  The term “Change in Control”shall mean:

(a)           the acquisition byany person or group deemed a person under Sections 3(a)(9) and 13(d)(3) ofthe Exchange Act (other than the Company and its subsidiaries as determinedimmediately prior to that date) of beneficial ownership, directly or indirectly(with beneficial ownership determined as provided in Rule 13d-3, or anysuccessor rule, under the Exchange Act), of a majority of the total combinedvoting power of all classes of Stock of the Company having the right underordinary circumstances to vote at an election of the Board, if such person orgroup deemed a person prior to such acquisition was not a beneficial owner ofat least five percent (5%) of such total combined voting power of the Company;

(b)           the date of approvalby the stockholders of the Company of an agreement providing for the merger orconsolidation of the Company with another corporation or other entity where (x)stockholders of the Company immediately prior to such merger or consolidationwould not beneficially own following such merger or consolidation shares entitlingsuch stockholders to a majority of all votes (without consolidation of therights of any class of stock to elect directors by a separate class vote) towhich all stockholders of the surviving corporation would be entitled in theelection of directors, or (y) where the members of the Board, immediately priorto such merger or consolidation, would not, immediately after such merger orconsolidation, constitute a majority of the board of directors of the survivingcorporation; or

(c)           the sale of all orsubstantially all of the assets of the Company.

1.4           *Code*.  The term “Code” shall mean the InternalRevenue Code of 1986, as amended.  Areference to any provision of the Code shall include reference to any successorprovision of the Code.

1.5           *Committee*.  The term “Committee” shall mean a committeedescribed in Section 10.

1.6           *Company*.  The term “Company” shall mean MedicalCV, Inc.and any Related Company.

1.7           *Covered Employee*.  The term “Covered Employee” means aParticipant who is a Covered Employee as specified in Section 8.17.

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1.8           *Covered Shares*.  The term “Covered Shares” shall mean thenumber of shares of Stock that a Participant may purchase pursuant to anOption.

1.9           *Director*.  The term “Director” shall mean a member ofthe Company’s Board.

1.10         *Employment.*  “Employment” means service by a Participantas an employee, director or independent contractor.

1.11         *Exchange Act*.  The term “Exchange Act” shall mean theSecurities Act of 1934, as amended.

1.12         *Exercise Price*.  The term “Exercise Price” shall mean theExercise Price of each Option granted under Section 4 established by theCommittee and determined by any reasonable method established by the Committeeat the time the Option is granted. Options granted pursuant to Section 4 of the Plan shall not have anExercise Price of less than 100% of the Fair Market Value of the Company’sStock on the date the Option is granted.

1.13         *Fair Market Value*.  The term “Fair Market Value” of a share ofStock on a given date shall mean the closing price of the share of Stock asreported on the Nasdaq Stock Market on such date, if the share of Stock is thenquoted on the Nasdaq Stock Market or, if the market is closed on that date, theclosing price of the share of Stock on the previous trading day.  If the Stock is not listed on the NasdaqStock Market, Fair Market Value shall be determined in good faith by the Boardor Committee.

1.14         *Incentive Stock Option*.  The term “Incentive Stock Option” or “ISO”shall mean an Option that is intended to satisfy the requirements of Section 422(b) ofthe Code.

1.15         *Non-Employee Director*.  The term “Non-Employee Director” shall mean a“non-employee director” as defined in Rule 16b-3(b)(3)(i) of theExchange Act.

1.16         *Non-Qualified StockOption*.  The term “Non-QualifiedStock Option” or “NSO” shall mean an Option that is not intended to satisfy therequirements applicable to an “incentive stock Option” described in Section 422(b) ofthe Code.  NSO grants may be awarded toany Participant.

1.17         *Option*.  The term “Option” or “Stock Option” shallmean an ISO or NSO granted pursuant to the Plan.  The grant of an Option entitles theParticipant to purchase shares of Stock at an Exercise Price established by theCommittee.

1.18         *Participant*.  The term “Participant” shall mean (a) anycommon law employee, prospective employee, or officer of the Company, (b) employeeand non-employee members of the Company’s Board, (c) consultants andadvisors to the Company, and (d) employees of any Related Company orbusiness partner of the Company.  AllParticipants must be natural persons who provide bona fide services to theCompany or a Related Company.  Inaddition, the services provided to the Company or Related Company must not bein connection with an offer or sale of securities in a capital raising transactionand must not directly or indirectly promote or maintain a market for theCompany’s Stock.  An Award may be grantedto a Participant prior to the date the Participant performs services for theCompany or Related Company, provided that such Award shall not become vestedprior to the date the Participant first performs such services.

1.19         *Performance Award*.  The term “Performance Award” shall mean anaward based upon the achievement of performance goals, as contemplated by Section 5.

1.20         *Plan*.  The term “Plan” shall mean this Amended andRestated 2001 Equity Incentive Plan.

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1.21         *Related Company*.  The term “Related Company” shall mean anycorporation other than the Company and any partnership, joint venture or otherentity in which the Company owns, directly or indirectly, at least a 20%beneficial ownership interest.  A RelatedCompany includes a subsidiary of the Company and an unbroken chain ofcorporations beginning with the Company if each of the corporations other thanthe last corporation in the unbroken chain owns 50% or more of the voting stockin one of the other corporations in such chain.

1.22         *Restricted Stock.*  The term “Restricted Stock” means a share ofCommon Stock granted to a Participant under Section 6 of the Plan.  Restricted Stock Awards entitle theParticipant to receive shares of common stock which have certain restrictionsthat lapse upon satisfaction of conditions imposed by the Committee at the timeof Award.

1.23         *Stock*.  The term “stock” shall mean shares of commonstock, $0.01 par value, of the Company.

1.24         *Stock Option Agreement*.  The term “Stock Option Agreement” or “Agreement”shall mean any written agreement evidencing the terms and conditions of an ISOor NSO granted under the Plan.  TheAgreement shall be subject to the terms and conditions of the Plan.

**SECTION 2**

**PURPOSE**

The MedicalCV, Inc. 2001 Equity Incentive Plan has beenestablished by MedicalCV, Inc. to (i) attract and retain individualseligible to participate in the Plan; (ii) motivate Participants, by meansof appropriate incentives, to achieve long-range goals; (iii) provideincentive compensation opportunities that are competitive with those of othersimilar companies; and (iv) further identify Participants’ interests withthose of the Company’s other shareholders through compensation that is based onthe Company’s common stock; and thereby promote the long-term financialinterest of the Company and any Related Company, including the growth in valueof the Company’s equity and enhancement of long-term shareholder return.

**SECTION 3**

**PARTICIPATION**

Subject to the terms and conditions of the Plan, the Committee maydetermine and designate, from time to time, Participants who will be grantedone or more Awards under the Plan.  Inits sole discretion and without shareholder approval, the Committee may grantto a Participant any Award or Awards permitted under the provisions of thePlan.  Awards may be granted asalternatives to or replacement of Awards outstanding under the Plan, or any otherplan or arrangement of the Company or Related Company (including a plan orarrangement of a business or entity, all or a portion of which is acquired bythe Company or a Related Company).  Onlyemployees are eligible to be granted Incentive Stock Options.

**SECTION 4**

**STOCK OPTIONS**

4.1           *General*.  The grant of an Option entitles theParticipant to purchase shares of Stock at an Exercise Price established by theCommittee.  Any Option awarded toParticipants under this Section 4 may be either NSOs or ISOs, asdetermined in the discretion of the Committee. To the extent that any Stock Option does not qualify as an ISO, it shallconstitute an NSO.

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4.2           *OptionAwards*.  Subject to the followingprovisions, Options awarded under the Plan shall be in such form and shall havesuch terms as the Committee may determine and specify in a Stock OptionAgreement entered into between the Participant and the Company.

(a)           *Exercise of an Option*.  An Option shall be exercisable in accordancewith such terms and conditions and during such periods as may be established bythe Committee.  In no event shall anyfraction of a share of Stock be issued upon the exercise of an Option.  An Option must be exercised for at least 100shares of Stock, or such lesser number of shares of Stock if the remainingportion of an Option is for fewer than 100 shares of Stock.

(b)           *Exercise Price*.  The Exercise Price of an Option granted underthis Section 4 shall be established by the Committee or shall bedetermined by a method established by the Committee at the time the Option isgranted, except that the Exercise Price shall not be less than 100% of the FairMarket Value of the Company’s Stock on the date of grant.

(c)           *Payment of Option Exercise Price*.  The payment of the Exercise Price of anOption granted under this Section 4 shall be subject to the following:

(1)        Subject to thefollowing provisions of this Subsection 4.2(c), the full Exercise Pricefor shares of Stock purchased upon the exercise of any Option shall be paid atthe time of such exercise or such other time as approved by the Committee.

(2)        Payment of the ExercisePrice shall be made in such manner as the Committee may provide in the Award,which may include cash (including cash equivalents), tendering of shares ofStock acceptable to the Committee and either already owned by the Participantor subject to Awards hereunder, and any other manner permitted by law andapproved by the Committee, or any combination of the foregoing.  If the Company determines that a Stock Optionmay be exercised using shares of Restricted Stock, then unless the Committeeprovides otherwise, the shares received upon the exercise of a Stock Optionwhich are paid for using Restricted Stock shall be restricted in accordancewith the original terms of the Restricted Stock Award.  In the case of any deferred paymentarrangement, interest shall be compounded at least annually and shall becharged at the minimum rate of interest necessary to avoid the treatment asinterest, under any applicable provisions of the Code, of any amounts otherthan amounts stated to be interest under the deferred payment arrangement.

(d)           *Settlement of Option*.  Shares of Stock delivered pursuant to theexercise of an Option shall be subject to such conditions, restrictions andcontingencies as the Committee, in its discretion, may establish in addition tosuch conditions, restrictions, and contingencies set forth in the Agreement.

(e)           *Vesting*. Participants shall vest in all Options in accordance with the terms andconditions of the Agreement entered into by and between the Participant and theCompany.  The total number of shares ofStock subject to an Option may, but need not, vest and therefore becomeexercisable in periodic installments that may, but need not, be equal.

(f)            *Option Term*.  The term of each Option shall be fixed by theCommittee.  In the event that the Plan isterminated pursuant to terms and conditions of Section 11, the Plan shallremain in effect as long as any Awards under it are outstanding.

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(g)           *Termination of Employment*.  Following the termination of Participant’semployment with the Company or a Related Company, the Option shall beexercisable to the extent determined by the Committee and specified in theAward Agreement.  The Committee mayprovide different post-termination exercise provisions with respect totermination of employment for different reasons.

(h)           *Incentive Stock Options*.  ISO grants may only be awarded to employeesof the Company, a “parent corporation,” or a “subsidiary corporation” as thoseterms are defined in Sections 424(e) and 424(f) of the Code.  In order for an employee to be eligible toreceive an ISO grant, the employee must be employed by the Company, parentcorporation, or subsidiary corporation during the period beginning on the datethe Option is granted and ending on the day three months prior to the date suchOption is exercised.  Notwithstanding theprovisions of Section 4.2, no ISO shall (i) have an Exercise Pricewhich is less than 100% of the Fair Market Value of the Stock on the date ofthe ISO Award, (ii) be exercisable more than ten (10) years after theISO is awarded, or (iii) be awarded more than ten (10) years afterthe Effective Date of this Plan.  No ISOawarded to an employee who owns more than 10% of the total combined votingpower of all classes of Stock of the Company, its “parent corporation” or any “subsidiarycorporation” shall (i) have an Exercise Price of less than 110% of theFair Market Value of the Stock on the date of the ISO Award or (ii) beexercisable more than five (5) years after the date of the ISO Award.  Notwithstanding Section 8.7, no ISOshall be transferable other than by will and the laws of descent anddistribution.  To the extent that theaggregate Fair Market Value (determined at the time of grant) of shares ofStock with respect to ISOs are exercisable for the first time by the employeeduring any calendar year, in combination with shares first exercisable underall other plans of the Company and any Related Company, exceeds $100,000, suchOptions shall be treated as NSOs.

(i)            *Early Exercise*.  The Option may, but need not, include aprovision whereby the Participant may elect at any time prior to his or hertermination of employment with the Company to exercise the Option as to anypart or all of the shares of Stock subject to the Option prior to the fullvesting of the Option.  Any unvestedshares of Stock so purchased may be subject to a repurchase Option in favor ofthe Company or to any other restrictions the Committee determines to beappropriate.

**SECTION 5**

**PERFORMANCE AWARDS AND PERFORMANCE SHARES**

5.1           *Performance Awards.*  TheCommittee shall have the right to designate Awards of Options and PerformanceShares as “Performance Awards.”  Thegrant or vesting of a Performance Award shall be subject to the achievement ofperformance goals established by the Committee based on one or more of thefollowing criteria, in each case applied to the Company on a consolidated basisor to a business unit, as specified by the Committee in an Award Agreement, andwhich the Committee may use as an absolute measure, as a measure of improvementrelative to prior performance, or as a measure of comparable performancerelative to a peer group of companies: sales, operating profits, operating profits before interest expenses andtaxes, net earnings, earnings per share, return on equity, return on assets,return on invested capital, total shareholder return, cash flow, debt to equityratio, market share, stock price, economic value added, and market valueadded.  The terms and conditions of aPerformance Award shall be set forth in an Award Agreement entered into betweenthe Company and the Participant.

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5.2           *Grant of PerformanceShares.*  After selectingParticipants who will receive Awards of Performance of Shares for a givenperformance period, the Committee shall inform each such Participant of theAward to be granted to the Participant at the completion of the performanceperiod, and the applicable terms and condition of the Award.  The Committee shall cause to be issued to eachParticipant a grant letter specifying the number of Performance Shares underhis Award and the number of Performance Shares which may be awarded subject tothe terms and conditions of such grant letter and Plan.

(a)           The Committee shallestablish the performance goals for each performance period.  The Committee shall also establish a schedule forsuch performance period setting forth the percentage of the Performance ShareAward which will be earned, based on the extent to which the performance goalsfor such performance period are actually achieved, the date on whichPerformance Shares awarded hereunder shall vest, or the date on which suchPerformance Shares shall be forfeited (in whole or in part) by the Participant forfailure to meet the performance goals, as specified by the Committee.

(b)           As promptly aspractical after each performance period, the Committee shall determine whether,or the extent to which, the performance goals have been achieved.  Based on such determination, the Participantshall be deemed to have earned the Performance Shares awarded to him, or apercentage thereof as provided in any schedule established by theCommittee.  In addition, the Committeemay, from time to time during a performance period and consistent with theterms and conditions of applicable Awards and performance goals, determine thatall or a portion of the Performance Shares awarded to one or more Participantshave been earned.  As soon asadministratively feasible following the satisfaction of the performance goals,the Committee shall certify that the performance goals have been met.

(c)           If during the courseof a performance period, there should occur, in the opinion of the Committee,significant changes in economic conditions or in the nature of the operationsof the Company, or any other pertinent changes which the Committee did notforesee or accurately predict the extent of in establishing the performancegoals for such performance period and which, in the Committee’s sole judgment,have, or are expected to have, a substantial effect on the performance of theCompany during the performance period, the Committee may make such adjustmentto the performance goals or measurements of such performance goals as theCommittee, in its sole judgment, may deem appropriate, but only as permittedunder Code Section 162(m) and regulations thereunder.

5.3           *Termination of Employment*.  In the event of a Participant’s Terminationof Employment prior to satisfaction of conditions related to outstandingPerformance Share Awards for reasons other than discharge or resignation, theParticipant or the Participant’s estate or beneficiary, in the sole discretionof the Committee, may be entitled to receive from Performance Shares held bythe Company a pro rata number of shares with respect to that Performance ShareAward, or such other portion of the Award, if any, as the Committee shalldetermine.  In the event of terminationof employment due to resignation or discharge, the Award will be cancelled, andthe Participant shall not be entitled to any further consideration with respectto the forfeited Performance Shares, subject to the discretion of the Committeeto release restrictions on all or any part of an Award.

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**SECTION 6**

**RESTRICTED STOCK**

Subject to the following provisions, the Committee may grant Awards ofRestricted Stock to a Participant in such form and on such terms and conditionsas the Committee may determine and specify in a Restricted Stock AwardAgreement entered into between the Company and the Participant:

(a)        The Restricted StockAward shall specify the number of shares of Restricted Stock to be awarded, theprice, if any, to be paid by the Participant and the date or dates on which, orthe conditions upon the satisfaction of which, the Restricted Stock willvest.  The grant and/or the vesting ofRestricted Stock may be conditioned upon the completion of a specified periodof service with the Company or a Related Company, upon the attainment ofspecified performance objectives or upon such other criteria as the Committeemay determine.

(b)        Stock certificatesrepresenting the Restricted Stock awarded to a Participant shall be registeredin the Participant’s name, but the Committee may direct that such certificatesbe held by the Company or its designee on behalf of the Participant.  Except as may be permitted by the Committee,no share of Restricted Stock may be sold, transferred, assigned, pledged orotherwise encumbered by a Participant until such share has vested in accordancewith the terms of the Restricted Stock Award. At the time the Restricted Stock vests, a certificate for such vestedshares shall be delivered to the Participant (or his or her designatedbeneficiary in the event of death), free from the restrictions imposed thereonexcept that any restrictions under federal or state securities laws shallcontinue to apply.

(c)        The Committee mayprovide that the Participant shall have the right to vote or receive dividendson Restricted Stock.  Unless theCommittee provides otherwise, Stock received as a dividend on, or in connectionwith a stock split of, Restricted Stock shall be subject to the samerestrictions as the Restricted Stock.

(d)        Except as may beprovided by the Committee, in the event of a Participant’s termination ofemployment or relationship with the Company prior to all of his or her RestrictedStock becoming vested, or in the event any conditions to the vesting ofRestricted Stock have not been satisfied prior to any deadline for thesatisfaction of such conditions as set forth in the Restricted Stock Award, theshares of Restricted Stock which have not vested shall be forfeited, and theCommittee may provide that (i) any purchase price paid by the Participantbe returned to the Participant or (ii) a cash payment equal to theRestricted Stock’s Fair Market Value on the date of forfeiture, if lower, bepaid to the Participant.

(e)        The Committee maywaive, in whole or in part, any or all of the conditions to receipt of, orrestrictions with respect to, any or all of the Participant’s Restricted Stock.

**SECTION 7**

**TAX OFFSET PAYMENTS**

The Committee may provide for a Tax Offset Payment to be made by theCompany to a Participant with respect to one or more Awards granted under thePlan.  The Tax Offset Payment shall be inan amount specified by

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the Committee, which shall not exceed theamount necessary to pay the federal, state, local and other taxes payable withrespect to the applicable Award, assuming that the Participant is taxed at themaximum tax rate applicable to such income. The Tax Offset Payment shall be paid solely in cash.  No Participant shall be granted a Tax OffsetPayment in any fiscal year with respect to more than the number of shares ofStock covered by Awards granted to such Participant in such fiscal year.  The terms and conditions of a Tax OffsetPayment Award shall be set forth in an Award Agreement entered into between theCompany and the Participant.

**SECTION 8**

**OPERATION AND ADMINISTRATION**

8.1           *General*.  The operation and administration of thisPlan, including any Awards granted under this Plan, shall be subject to theprovisions of Section 8.

8.2           *Effective Date*.  The Plan, as initially adopted, becameeffective as of June 28, 2001 (the “Effective Date”) and the Plan, asamended and restated, shall be effective subject to approval by theshareholders of the Company; provided, however, that to the extent that Awardsare granted under the Plan prior to its approval by the shareholders of theCompany, the Awards shall be subject to the approval of the Plan by theshareholders of the Company.  The term ofthe Plan shall be limited in duration to ten (10) years from the earlierof (a) the Effective Date or (b) the date the Plan is approved by theCompany’s shareholders.

8.3           *Shares Subject to Plan*.  The shares of Stock for which Awards may begranted under this Plan shall be subject to the following:

(a)        Subject to adjustmentpursuant to the provisions of Section 8.3(c), the maximum aggregate numberof shares of Stock that may be issued under the Plan shall be 600,000 shares.  The shares of Stock may be authorized, butunissued, or reacquired Stock.

(b)        To the extent an Awardterminates without having been exercised, or shares awarded are forfeited, suchshares shall again be available issue under the Plan.  Shares of Stock surrendered in payment of theExercise Price and shares of Stock which are withheld in order to satisfyfederal, state or local tax liability, shall not count against the maximumaggregate number of shares authorized to be issued pursuant to this Plan, andshall again be available for issuance pursuant to the terms of the Plan.

(c)        In the event that anylarge, special and non-recurring dividend or other distribution (whether in theform of cash or property other than Stock), recapitalization, forward orreverse split, Stock dividend, reorganization, merger, consolidation, spin-off,combination, repurchase, share exchange, liquidation, dissolution or othersimilar corporate transaction or event affects the Stock such that anadjustment is determined by the Committee to be appropriate, then the Committeeshall, in an equitable manner as determined by the Committee, adjust any or allof (i) the number and kind of shares of Stock or other securities of theCompany or other issuer which are subject to the Plan, (ii) the number andkind of shares of Stock or other securities of the Company or other issuer bywhich annual per-person Award limitations are measured under Section 8.3(d),(iii) the number and kind of shares of Stock or other securities of theCompany or other issuer subject to or deliverable in respect of outstandingAwards and (iv) the Exercise Price, settlement price or purchase pricerelating to any Award or, if deemed appropriate, the Committee may makeprovision for a payment of cash or property to the holder of an outstandingOption or other Award.  In addition, theCommittee is authorized to make adjustments in the terms

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andconditions of, and the criteria included in, Awards (includingperformance-based Awards and performance goals and any hypothetical fundingpool relating thereto) in recognition of unusual or nonrecurring events(including, without limitation, events described in the preceding sentence, aswell as acquisitions and dispositions of businesses and assets affecting anyperformance conditions), or in response to changes in applicable laws,regulations, or accounting principles; provided that no such adjustment shallbe authorized or made if and to the extent that the existence of such authority(i) would cause Options granted under the Plan to Participants designatedby the Committee as Covered Employees and intended to qualify as “performance-basedcompensation” under Code Section 162(m) and regulations thereunder tootherwise fail to qualify as “performance-based compensation” under Code Section 162(m)and regulations thereunder, or (ii) would cause the Committee to be deemedto have authority to change the targets, within the meaning of TreasuryRegulations 1.162-27(e)(4)(vi), under the performance goals relating to Optionsgranted to Covered Employees and intended to qualify as “performance-basedcompensation” under Code Section 162(m) and regulations thereunder.

(d)        Subject to adjustmentas provided under Section 8.3(c), (i) the maximum number of shares ofCommon Stock with respect to which stock Options may be granted during a calendaryear to any Participant under the Plan shall be 100,000 shares, and (ii) withrespect to Performance Shares and Restricted Stock intended to qualify asperformance-based compensation within the meaning of Section 162(m) of theCode, the maximum number of shares of common stock subject to such Awardsgranted during a calendar year to any Participant under the Plan shall be theequivalent of 10,000 shares.

8.4           *Securities LawsRestrictions*.  Issuance ofshares of Stock or other amounts under the Plan shall be subject to thefollowing:

(a)        If at any time theCommittee determines that the issuance of Stock under the Plan is or may beunlawful under the laws of any applicable jurisdiction, the right to exerciseany Stock Option or receive any Restricted Stock shall be suspended until theCommittee determines that such issuance is lawful.  The Company shall have no obligation toeffect any registration of qualification of the Stock under federal or statelaws.

(b)        Any person exercising aStock Option or receiving Restricted Stock shall make such representations(including representations to the effect that such person will not dispose ofthe Stock so acquired in violation of federal and state securities laws) andfurnish such information as may, in the opinion of counsel for the Company, beappropriate to permit the Company to issue the Stock in compliance withapplicable federal and state securities laws. The Committee may refuse to permit the exercise of a Stock Option orissuance of Restricted Stock until such representations and information havebeen provided.

(c)        The Company may placean appropriate legend evidencing any transfer restrictions on all shares ofStock issued under the Plan and may issue stop transfer instructions in respectthereof.

(d)        To the extent that thePlan provides for issuance of stock certificates to reflect the issuance ofshares of Stock, the issuance may be effected on a non-certificated basis, tothe extent not prohibited by applicable law or the applicable rules of anystock exchange.

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8.5           *Tax Matters*.

(a)        *Withholding*.  The Company and any subsidiary or affiliateis authorized to withhold from any Award granted, any payment relating to anAward under the Plan, including from a distribution of Stock, or any payroll orother payment to a Participant, amounts of withholding and other taxes due orpotentially payable in connection with any transaction or event involving anAward, or to require a Participant to remit to the Company an amount in cash orother property (including Stock) to satisfy such withholding before taking anyaction with respect to an Award, and to take such other action as the Committeemay deem advisable to enable the Company and Participants to satisfyobligations for the payment of withholding taxes and other tax obligationsrelating to any Award.  This authorityshall include authority to withhold or receive Stock or other property and tomake cash payments in respect thereof in satisfaction of a Participant’swithholding obligations, either on a mandatory or elective basis in thediscretion of the Committee, or in satisfaction of other tax obligations.  The Company can delay the delivery to aParticipant of Stock under any Award to the extent necessary to allow theCompany to determine the amount of withholding to be collected and to collectand process such withholding.

(b)        *RequiredConsent to and Notification of Code Section 83(b) Election*.  No election under Section 83(b) ofthe Code (to include in gross income in the year of transfer the amounts specifiedin Code Section 83(b)) or under a similar provision of the laws of ajurisdiction outside the United States may be made unless expressly permittedby the terms of the Award document or by action of the Committee in writingprior to the making of such election.  Inany case in which a Participant is permitted to make such an election inconnection with an Award, the Participant shall notify the Company of suchelection within ten days of filing notice of the election with the InternalRevenue Service or other governmental authority, in addition to any filing andnotification required pursuant to regulations issued under Code Section 83(b) orother applicable provision.

(c)        *Requirementof Notification Upon Disqualifying Disposition Under Code Section 421(b)*.  If any Participant shall make any dispositionof shares of Stock delivered pursuant to the exercise of an ISO under thecircumstances described in Code Section 421(b) (i.e., a disqualifyingdisposition), such Participant shall notify the Company of such dispositionwithin ten days thereof.

8.6           *Payments*.  Awards may be settled in any of the methodsdescribed in Section 4.2(c).  AnyAward settlement, including payment deferrals, may be subject to suchconditions, restrictions and contingencies as the Committee shalldetermine.  The Committee may permit orrequire the deferral of any Award payment, subject to such rules andprocedures as it may establish, which may include provisions for the payment orcrediting of interest, or dividend equivalents, including converting suchcredits into deferred Stock equivalents. Each Related Company shall be liable for payment of cash due under thePlan with respect to any Participant to the extent that such benefits are attributableto the services rendered for that Related Company by the Participant.  Any disputes relating to liability of aRelated Company for cash payments shall be resolved by the Committee.

8.7           *Transferability*.  Except as otherwise provided by theCommittee, Awards under the Plan may not be sold, pledged, assigned,hypothecated, transferred, or disposed of in any manner other than bybeneficiary designation, will or by the laws of descent and distribution.  If the Committee makes an Award transferable,the Award Agreement shall set forth such additional terms and conditionsregarding transferability as the Committee deems appropriate.

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8.8           *Form and Time ofElections*.  Unless otherwisespecified herein, each election required or permitted to be made by anyParticipant or other person entitled to benefits under the Plan, and anypermitted modification, or revocation thereof, shall be in writing filed withthe Committee at such times, in such form, and subject to such restrictions andlimitations, not inconsistent with the terms of the Plan, as the Committeeshall require.

8.9           *Agreement With Company*.  Any Award under the Plan shall be subject tosuch terms and conditions, not inconsistent with the Plan, as the Committeeshall, in its sole discretion, prescribe. The terms and conditions of any Award shall be reflected in an AwardAgreement.  A copy of the Award Agreementshall be provided to the Participant, and the Committee may, but need notrequire, the Participant to sign the Award Agreement.

8.10         *Limitation of ImpliedRights*.

(a)        Neither a Participantnor any other person shall, by reason of participation in the Plan, acquire anyright in or title to any assets, funds or property of the Company or anyRelated Company whatsoever, including, without limitation, any specific funds,assets, or other property which the Company or any Related Company, in its solediscretion, may set aside in anticipation of a liability under the Plan.  A Participant shall have only a contractualright to the Stock or amounts, if any, payable under the Plan, unsecured by anyassets of the Company or any Related Company, and nothing contained in the Planshall constitute a guarantee that the assets of the Company or any RelatedCompany shall be sufficient to pay any benefits to any Participant.

(b)        This Plan does notconstitute a contract of employment, and selection as a Participant will notgive the Participant the right to be retained in the employ of the Company orany Related Company, nor any right or claim to any future grants or to anybenefit under the Plan, unless such right or claim has specifically accruedunder the terms of the Plan.  Except asotherwise provided in the Plan, no Award under the Plan shall confer upon aParticipant any rights of a shareholder of the Company prior to the date onwhich the Participant fulfills all conditions for receipt of such rights.

8.11         *Termination for Cause*.  If the employment of a Participant isterminated by the Company or a Related Company for “cause,” then the Committeeshall have the right to cancel any Awards granted to the Participant under thePlan.  “Cause” shall be an eventconstituting cause under any written employment agreement between theParticipant and the Company, or in absence of such an agreement, the term “cause”shall mean (1) the Participant’s violation of any provision of anynon-competition agreement or confidentiality agreement with the Company; (2) anillegal or negligent action by the Participant that materially and adverselyaffects the Company; (3) the Participant’s failure or refusal to performhis/her duties (except when prevented by reason of illness or disability); or (4) convictionof the Participant of a felony involving moral turpitude.

8.12         *Evidence*.  Evidence required of anyone under the Planmay be by certificate, affidavit, document or other information which theperson acting on it considers pertinent and reliable, and signed, made orpresented by the proper party or parties.

8.13         *Forfeiture of Options andOther Awards and Gains Realized Upon Prior Option Exercises or Award Settlement*.  Unless otherwise determined by the Committee,each Award granted hereunder, other than Awards granted to non-employeedirectors, shall be subject to the following additional forfeiture conditions,to which the Participant, by accepting an Award hereunder, agrees.  If any of the events specified in this Section 8.13occurs (a “Forfeiture Event”), all of the following forfeitures will result:

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(a)        The unexercised portionof each Option held by the Participant, whether or not vested, and any otherAward not then settled, will be immediately forfeited and canceled upon theoccurrence of the Forfeiture Event; and

(b)        The Participant will beobligated to repay to the Company, in cash, within five business days afterdemand is made therefor by the Company, the total amount of Award Gain (asdefined herein) realized by the Participant upon each exercise of an Option orsettlement of an Award that occurred on or after (A) the date that is sixmonths prior to the occurrence of the Forfeiture Event, if the Forfeiture Eventoccurred while the Participant was employed by the Company or a subsidiary oraffiliate, or (B) the date that is six months prior to the date theParticipant’s employment by the Company or a subsidiary or affiliateterminated, if the Forfeiture Event occurred after the Participant ceased to beso employed.  For purposes of thisSection, the term “Award Gain” shall mean (i), in respect of a given Optionexercise, the product of (X) the Fair Market Value per share of Stock at thedate of such exercise (without regard to any subsequent change in the marketprice of shares) minus the Exercise Price times (Y) the number of shares as towhich the Option was exercised at that date, and (ii), in respect of any othersettlement of an Award granted to the Participant, the Fair Market Value of thecash or Stock paid or payable to Participant (regardless of any electivedeferral) less any cash or the Fair Market Value of any Stock or property(other than an Award or Award which would have itself then been forfeitablehereunder and excluding any payment of tax withholding) paid by the Participantto the Company as a condition of or in connection such settlement.

(c)        The Committee may, inits discretion, waive in whole or in part the Company’s right to forfeitureunder this Section, but no such waiver shall be effective unless evidenced by awriting signed by a duly authorized officer of the Company.  In addition, the Committee may imposeadditional conditions on Awards, by inclusion of appropriate provisions in thedocument evidencing or governing any such Award.

8.14         Notwithstanding anything herein to the contrary, any Awardthat is deferred compensation within the meaning of Code Section 409Ashall be automatically modified and limited to the extent that the Committeedetermines necessary to avoid the imposition of the additional tax under Section 409A(a)(1)(B) ofthe Code on a Participant holding such Award.

8.15         Other provisions of the Plan notwithstanding, the Committee’sauthority under the Plan is limited to the extent necessary to ensure that anyOption or other Award of a type that the Committee has intended to be subjectto fixed accounting with a measurement date at the date of grant or the dateperformance conditions are satisfied under APB 25 shall not become subject to “variable”accounting solely due to the existence of such authority, unless the Committeespecifically determines that the Award shall remain outstanding despite such “variable”accounting.

8.16         The Committee may modify the terms of any Award under the Planmade to or held by a Participant who is then resident or primarily employedoutside of the United States in any manner deemed by the Committee to benecessary or appropriate in order that such Award shall conform to laws,regulations and customs of the country in which the Participant is thenresident or primarily employed, or so that the value and other benefits of theAward to the Participant, as affected by foreign tax laws and otherrestrictions applicable as a result of the Participant’s residence oremployment abroad shall be comparable to the value so such an Award to aParticipant who is resident or primarily employed in the United States.  An Award may be modified under this Section 8.16in a manner that is inconsistent with the express terms of the Plan, so long assuch modifications will not contravene

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any applicable law or regulation or result inactual liability under Section 16(b) for the Participant whose Awardis modified.

8.17         It is the intent of the Company that Options PerformanceShares granted to Covered Employees and other Awards designated as PerformanceAwards to Covered Employees subject to Section 5 shall constitutequalified “performance-based compensation” within the meaning of Code Section 162(m)and regulations thereunder, unless otherwise determined by the Committee at thetime of allocation of an Award. Accordingly, the terms of Section 5, including the definitions ofCovered Employee and other terms used therein, shall be interpreted in a mannerconsistent with Code Section 162(m) and regulations thereunder.  The foregoing notwithstanding, because theCommittee cannot determine with certainty whether a given Participant will be aCovered Employee with respect to a fiscal year that has not yet been completed,the term Covered Employee as used herein shall mean only a person designated bythe Committee as likely to be a Covered Employee with respect to a specifiedfiscal year.  If any provision of thePlan or any Award document relating to an Award that is designated as intendedto comply with Code Section 162(m) does not comply or is inconsistent withthe requirements of Code Section 162(m) or regulations thereunder, suchprovision shall be construed or deemed amended to the extent necessary toconform to such requirements, and no provision shall be deemed to confer uponthe Committee or any other person discretion to increase the amount ofcompensation otherwise payable in connection with any such Award uponattainment of the applicable performance objectives.

8.18         *No Repricing WithoutShareholder Approval*.  Exceptas provided in Section 8.3(c) hereof relating to certainanti-dilution adjustments, unless the approval of shareholders of the Companyis obtained, Awards of Options shall not be amended to lower their ExercisePrices, and such Awards may not be exchanged for other Options with lowerExercise Prices.

**SECTION 9**

**CHANGE IN CONTROL**

9.1           *Impact of Event*.  Unless the Board or Committee providesotherwise (either at the time of grant of an Award or thereafter) prior to aChange in Control, this Section 9.1 shall govern the treatment of anyOption or Restricted Stock, the exercisability, vesting and/or settlement ofwhich is based solely upon continued employment or passage or time.  In the case of an Award subject to this Section 9.1that the acquiring or surviving company in the Change in Control assumes uponand maintains following the Change in Control (which Award shall be adjusted asto the number and kind of shares as may be determined appropriate by theCommittee prior to the Change in Control), if there occurs an involuntarytermination without cause of the Participant holding such Award (excludingvoluntary resignation, death, disability or retirement) within three monthsprior to or eighteen months following the Change in Control such Award shall betreated as provided in clause (a) or (b) of this Section 9.1, asapplicable.  In the case of an Awardsubject to this Section 9.1 that the acquiring or surviving company in theChange in Control does not assume upon the Change in Control, immediately priorto the Change in Control such Award shall be treated as provided in clause (a) or(b) of this Section 9.1 as applicable.  The treatment provided for under this Section 9.1is as follows:

(a)        in the case of anOption, the Participant shall have the ability to exercise such Option,including any portion of the Option not previously exercisable, until theearlier of the expiration of the Option under its original term following suchdate of termination of employment; and

(b)        in the case ofRestricted Stock, the Award shall become fully vested and shall be settled infull.  The Committee may also, throughthe terms of an Award or otherwise, provide for an absolute or conditionalexercise, payment or lapse of conditions or restrictions on an

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Awardwhich shall only be effective if, upon the announcement of a transactionintended to result in a Change in Control, no provision is made in suchtransaction for the assumption and continuation of outstanding Awards.

9.2           *Effect of Change inControl Upon Performance-based Awards*.  Unless the Committee specifies otherwise inthe terms of an Award prior to a Change in Control, this Section 9.2 shallcontrol the treatment of any Restricted Stock if at the time of the Change inControl the grant, issuance, retention, vesting and/or settlement of such Awardis based in whole or in part on performance criteria and level of achievementversus such criteria.  In the case of anAward subject to this Section 9.2 in which fifty percent (50%) or more ofthe performance period applicable to the Award has elapsed as of the date ofthe Change in Control, the Participant shall be entitled to payment, vesting orsettlement of such Award based upon performance through a date occurring withinthree months prior to the date of the Change in Control, as determined by theCommittee prior to the Change in Control, and pro-rated based upon thepercentage of the performance period that has elapsed between the date suchAward was granted and the date of the Change in Control.  In the case of an Award subject to this Section 9.2in which less than fifty percent (50%) of the performance period applicable tothe Award has elapsed as of the date of the Change in Control, the Participantshall be entitled to payment, vesting or settlement of the target amount ofsuch Award, as determined by the Committee prior to the Change in Control,pro-rated based upon the percentage of the performance period that has elapsedbetween the date such Award was granted and the date of the Change inControl.  The Committee may determineeither in advance or at the time of the Change in Control the treatment of thepro-rata portion of an Award attributable to the portion of the performanceperiod occurring after the date of the Change in Control.

Notwithstanding the foregoing, in no event shall the treatmentspecified in Sections 9.1 and 9.2 apply with respect to an Award prior to theearliest to occur of (A) the date such amounts would have been distributedin the absence of the Change in Control, (B) a Participant’s “separationfrom service” (as defined under Section 409A of the Code) with the Company(or six months thereafter for “specified employees”), (C) the Participant’sdeath or “disability” (as defined in Section 409A(a)(2)(C) of theCode), or (D) a “change in the ownership or effective control” of theCompany or in the “ownership of a substantial portion of the assets” of theCompany within the meanings ascribed to such terms in Treasury Departmentregulations issued under Section 409A of the Code, if and to the extentthat the Committee determines, in its sole discretion, that the effect of suchtreatment prior to the time specified in this Section 9.2(A), (B), (C) or(D) would be the imposition of the additional tax under Section 409A(a)(1)(B) ofthe Code on a Participant holding such Award.

**SECTION 10**

**COMMITTEE**

10.1         *Administration*.  The Plan shall be administered by theCompensation Committee of the Board or such other committee of Directors as theBoard shall designate, which shall consist of not less than two Non-EmployeeDirectors.  The members of the Committeeshall be Non-Employee Directors and shall serve at the pleasure of theBoard.  To the extent that the Boarddetermines it to be desirable to qualify Awards granted hereunder as “performance-basedcompensation” within the meaning of Section 162(m) of the Code, the Planshall be administered by a Committee of two or more “outside directors” withinthe meaning of Section 162(m) of the Code. To the extent that the Board determines it to be desirable to qualifyAwards as exempt under Rule 16b-3, the Award transactions contemplatedhereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.  All determinations made by the Committeepursuant to the provisions of the Plan shall be final and binding on allpersons, including the Company and Participants.  The Board may administer the Plan or exerciseany or all of the administration duties of the Committee at any time when aCommittee meeting the requirements of this Section has not been appointed,and the Board may exempt Awards pursuant to Rule 16b-3(d)(1) of theExchange Act.

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10.2         *Powers of Committee**.  The Committee shall have thefollowing authority with respect to Awards under the Plan*:  to grant Awards; to adopt, alter and repealsuch administrative rules, guidelines and practices governing the Plan as itshall deem advisable; to interpret the terms and provisions of the Plan and anyAward granted under the Plan; and to otherwise supervise the administration ofthe Plan.  In particular, and withoutlimiting its authority and powers, the Committee shall have the authority:

(a)        to determine whetherand to what extent any Award or combination of Awards will be grantedhereunder;

(b)        to select theParticipants to whom Awards will be granted;

(c)        to determine the numberof shares of Stock to be covered by each Award granted hereunder subject to thelimitations contained herein;

(d)        to determine the termsand conditions of any Award granted hereunder, including, but not limited to,any vesting or other restrictions based on such performance objectives and suchother factors as the Committee may establish, and to determine whether theperformance objectives and other terms and conditions of the Award are satisfied;

(e)        to determine thetreatment of Awards upon the Participant’s retirement, disability, death,termination for cause or other termination of employment or service;

(f)         to determine thatamounts equal to the amount of any dividends declared with respect to thenumber of shares covered by an Award (i) will be paid to the Participantcurrently or (ii) will be deferred and deemed to be reinvested or (iii) willotherwise be credited to the Participant or that the Participant has no rightswith respect to such dividends;

(g)        to amend the terms ofany Award, prospectively or retroactively; provided, however, that no amendmentshall impair the rights of the Participant without his or her written consent;and

(h)        to substitute new StockOptions for previously granted Stock Options, or for Options granted underother plans or agreements, in each case including previously granted Optionshaving higher Option prices.

Determinations by the Committee under thePlan relating to the form, amount, and terms and conditions of Awards need notbe uniform, and may be made selectively among Participants who receive Awardsunder the Plan, whether or not such Participants are similarly situated.  The Committee shall have the power toaccelerate the time at which an Award may first be exercised or the time duringwhich an Award or any part thereof will vest in accordance with the Plan,notwithstanding any provisions in an Award Agreement stating the time at whichthe Award may first be exercised or the time during which the Award will vest.

10.3         *Delegation by Committee*.  Except to the extent prohibited by applicablelaw or the applicable rules of a stock exchange, the Committee mayallocate all or any portion of its responsibilities and powers to any one ormore of its members and may delegate all or any part of its responsibilitiesand powers to any person or persons selected by it.  Any such allocation or delegation may berevoked by the Committee at any time.

10.4         *Information to beFurnished to Committee*.  TheCompany and any Related Company shall furnish the Committee with such data andinformation as it determines may be required for it to discharge itsduties.  The records of the Company andany Related Company as to a Participant’s employment, termination ofemployment, leave of absence, reemployment and compensation shall be conclusiveon all persons unless determined to be

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incorrect. Participants and other persons entitled to benefits under the Plan mustfurnish the Committee such evidence, data or information as the Committee considersdesirable to carry out the terms of the Plan.

10.5         *Non-Liability of Boardand Committee*.  No member ofthe Board or the Committee, nor any officer or employee of the Company actingon behalf of the Board or the Committee, shall be personally liable for anyaction, determination or interpretation taken or made with respect to the Plan,and all members of the Board or the Committee and all officers or employees ofthe Company acting on their behalf shall, to the extent permitted by law, befully indemnified and protected by the Company with respect to any such action,determination or interpretation.

**SECTION 11**

**AMENDMENT AND TERMINATION**

The Board may, at any time, amend or terminate the Plan, provided thatno amendment or termination may, in the absence of written consent to thechange by the affected Participant (or, if the Participant is not then living,the affected beneficiary), adversely affect the rights of any Participant orbeneficiary under any Award granted under the Plan prior to the date suchamendment is adopted by the Board; provided that adjustments made pursuant toSubsection 8.3(c) shall not be subject to the foregoing limitationsof this Section 11.  An amendmentshall be subject to approval by the Company’s shareholders only to the extentrequired by applicable laws, regulations or rules of a stock exchange orsimilar entity.

**SECTION 12**

**GENERAL PROVISIONS**

12.1         *Award Agreements*.  No Participant will have rights under anAward granted to such Participant unless and until an Award Agreement has beenduly executed on behalf of the Company and the Participant.

12.2         *No Limit on OtherCompensation Arrangements*. Nothing contained in the Plan shall prevent the Company or any RelatedCompany from adopting or continuing in effect other or additional compensationarrangements, and such arrangements may be either generally applicable orapplicable only in specific cases.

12.3         *Headings*.  The headings of the sections and subsectionsof this Plan are intended for the convenience of the parties only and shall inno way be held to explain, modify, construe, limit, amplify or aid in theinterpretation of the provisions hereof.

12.4         *Beneficiaries*.  A Participant may, from time to time, nameany beneficiary or beneficiaries (who may be named contingently orsuccessively) to whom any benefit under the Plan may be paid or transferred incase of death.  Each designation willrevoke all prior designations, shall be in a form prescribed by the Committee,and will be effective only when filed by the Participant in writing with theCommittee during his or her lifetime.  Inthe absence of any such designation, benefits outstanding at the Participant’sdeath shall be paid or transferred to his or her estate.  There shall be no third party beneficiariesof or to this Plan.  Any beneficiary ofthe Participant shall have only a claim to such benefits as may be determinedto be payable hereunder, if any, and shall not, under any circumstances otherthan the right to claim such benefits, be deemed a third party beneficiary ofor to this Plan.

12.5         *Repurchase Option*.  The terms of any repurchase Option shall bespecified in the Award Agreement.

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12.6         *Governing Law*.  The Plan, and all agreements hereunder, shallbe construed in accordance with and governed by the laws of the State ofMinnesota, except to the extent preempted by federal law, without regard to theprinciples of comity or the conflicts of law provisions of any jurisdiction.

12.7         *Severability; EntireAgreement*.  If any of theprovisions of the Plan or any Award document is finally held to be invalid,illegal or unenforceable (whether in whole or in part), such provision shall bedeemed modified to the extent, but only to the extent, of such invalidity,illegality or unenforceability, and the remaining provisions shall not beaffected thereby; provided, that, if any of such provisions is finally held tobe invalid, illegal, or unenforceable because it exceeds the maximum scopedetermined to be acceptable to permit such provision to be enforceable, suchprovision shall be deemed to be modified to the minimum extent necessary tomodify such scope in order to make such provision enforceable hereunder.  The Plan and any agreements or documentsdesignated by the Committee as setting forth the terms of an Award contain theentire agreement of the parties with respect to the subject matter thereof andsupersede all prior agreements, promises, covenants, arrangements,communications, representations and warranties between them, whether written ororal with respect to the subject matter thereof.

12.8         *Plan Effective Date andTermination*.  The Plan, asamended and restated, shall become effective if, and at such time as, thestockholders of the Company have approved it in accordance with applicable lawand stock exchange requirements.  Unlessearlier terminated by action of the Board of Directors, the authority of theCommittee to make grants under the Plan shall terminate on June 28, 2011,and the Plan will remain in effect until such time as no Stock remainsavailable for delivery under the Plan or as set forth above and the Company hasno further rights or obligations under the Plan with respect to outstandingAwards under the Plan.

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