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                                                                   Exhibit 10.1

                            AUGUST TECHNOLOGY CORPORATION

                                1997 STOCK OPTION PLAN


                        ARTICLE 1.  ESTABLISHMENT AND PURPOSE

     1.1  ESTABLISHMENT.  August Technology Corporation (the "Company") hereby
establishes a plan providing for the grant of stock options to certain eligible
employees, directors and consultants of the Company and its subsidiaries.  This
plan shall be known as the 1997 Stock Option Plan (the "Plan").

     1.2  PURPOSE.  The purpose of the Plan is to advance the interests of the
Company and its shareholders by enabling the Company to attract and retain
persons of ability as employees, directors and consultants, by providing an
incentive to such individuals through equity participation in the Company and by
rewarding such individuals who contribute to the achievement by the Company of
its long-term economic objectives.

                               ARTICLE 2.  DEFINITIONS

     The following terms shall have the meanings set forth below, unless the
context clearly otherwise requires:

     2.1  "BOARD" means the Board of Directors of the Company.

     2.2  "CHANGE IN CONTROL" means an event described in Article 11 below.

     2.3  "CODE"  means the Internal Revenue Code of 1986, as amended.

     2.4  "COMMITTEE" means the entity administering the Plan, as provided in
Article 3 below.

     2.5  "COMMON STOCK" means the common stock of the Company, par value $.01
per share, or the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with Section 4.3 below.

     2.6  "DISABILITY" means the occurrence of an event which constitutes
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.

     2.7  "ELIGIBLE PERSONS" means individuals who are (a) salaried employees
(including, without limitation, officers and directors who are also employees)
of the Company, (b) Non-Employee Directors, or (c) consultants to the Company.

     2.8  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

     2.9  "FAIR MARKET VALUE" means, with respect to the Common Stock, as of any
date:

          (a)  if the Common Stock is listed or admitted to unlisted trading
     privileges on any national securities exchange or is not so listed or
     admitted but transactions in the Common Stock are reported on the NASDAQ
     National Market System, the mean between the reported high and low sale
     prices of the Common Stock on such exchange or by the NASDAQ National
     Market System as of such date (or, if no shares were traded on such day, as
     of the next preceding day on which there was such a trade); or

          (b)  if the Common Stock is not listed or admitted to unlisted trading
     privileges or reported on the NASDAQ National Market System, and bid and
     asked prices therefor in the over-the-counter market are



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     reported by the NASDAQ System or the National Quotation Bureau, Inc. (or
     any comparable reporting service), the mean of the closing bid and asked
     prices as of such date, as reported by the NASDAQ System, or, if not
     reported thereon, as reported by the National Quotation Bureau, Inc. (or
     a comparable reporting service); or

          (c)  if the Common Stock is not listed or admitted to unlisted trading
     privileges, or reported on the NASDAQ National Market System, and bid and
     asked prices are not reported, the price that the Committee determines in
     good faith in the exercise of its reasonable discretion. The Committee's
     determination as to the current value of the Common Stock shall be final,
     conclusive and binding for all purposes and on all persons, including,
     without limitation, the Company, the shareholders of the Company, the
     Optionees and their respective successors-in-interest.  No member of the
     Board or the Committee shall be liable for any determination regarding
     current value of the Common Stock that is made in good faith.

     2.10 "INCENTIVE STOCK OPTION" means a right to purchase Common Stock
granted to an Optionee pursuant to Section 6.5 of the Plan that qualifies as an
incentive stock option within the meaning of Section 422 of the Code.

     2.11 "NON-EMPLOYEE DIRECTOR" means any member of the Board who is not an
employee of the Company or any Subsidiary.

     2.12 "NON-STATUTORY STOCK OPTION means a right to purchase Common Stock
granted to an Optionee pursuant to Section 6.6 of the Plan that does not qualify
as an Incentive Stock Option.

     2.13 "OPTION" means an Incentive Stock Option or a Non-Statutory Stock
Option.

     2.14 "OPTIONEE" means an Eligible Person who receives one or more Incentive
Stock Options or Non-Statutory Stock Options under the Plan.

     2.15 "PERSON" means any individual, corporation, partnership, group,
association or other "person" (as such term is used in Section 14(d) of the
Exchange Act), other than the Company, a wholly owned subsidiary of the Company
or any employee benefit plan sponsored by the Company.

     2.16 "RETIREMENT" means the retirement of an Optionee pursuant to and in
accordance with the regular retirement plan or practice of the Company or the
Subsidiary employing the Optionee.

     2.17 "SECURITIES ACT" means the Securities Act of 1933, as amended.

     2.18 "SUBSIDIARY" means any corporation that is a subsidiary corporation of
the Company (within the meaning of Section 424(f) of the Code).

     2.19 "TAX DATE" means a date defined in Section 6.5(c) of the Plan.

                           ARTICLE 3.  PLAN ADMINISTRATION

     The Plan shall be administered by the Board or by a Committee of the Board
consisting of not less than 2 persons; provided, however, that from and
after the date on which the Company first registers a class of its equity
securities under Section 12 of the Exchange Act the Plan shall be administered
by the Board, a majority of which Board and a majority of whom acting on any
matter under the Plan shall be "disinterested persons" as defined by Rule l6b-3
of the Rules and Regulations of the Securities and Exchange Commission, as
amended ("Rule l6b-3") or by a Committee consisting solely of not less than
2 members of the Board who are "disinterested persons" within the meaning
of Rule l6b-3.  Members of a Committee, if established, shall be appointed from
time to time by the Board, shall serve at the pleasure of the Board and may
resign at any time upon written notice to the Board.  A majority of the


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members of the Committee shall constitute a quorum.  The Committee shall act
by majority approval of its members, shall keep minutes of its meetings and
shall provide copies of such minutes to the Board.  Action of the Committee
may be taken without a meeting if unanimous written consent thereto is given.
 Copies of minutes of the Committee's meetings and of its actions by written
consent shall be provided to the Board and kept with the corporate records of
the Company.  As used in this Plan, the term "Committee" will refer either to
the Board or to such a Committee, if established.  From and after the date on
which the Company first registers a class of its equity securities under
Section 12 of the Exchange Act, no member of the Committee shall be eligible,
or shall have been eligible at any time within the lesser of one year or the
period since the Company first registered a class of its equity securities
under Section 12 of the Exchange Act, to receive an Incentive Stock Option or
a Non-Statutory Stock Option under the Plan.

     In accordance with the provisions of the Plan, the Committee shall select
the Optionees from Eligible Persons; shall determine the number of shares of
Common Stock to be subject to Options granted pursuant to the Plan, the time at
which such Options are granted, the Option exercise price, Option period and the
manner in which each such Option vests or becomes exercisable; and shall fix
such other provisions of such Options as the Committee may deem necessary or
desirable and as consistent with the terms of the Plan.  The Committee shall
determine the form or forms of the agreements with Optionees which shall
evidence the particular terms, conditions, rights and duties of the Company and
the Optionees under Options granted pursuant to the Plan.  The Committee shall
have the authority, subject to the provisions of the Plan, to establish, adopt
and revise such rules and regulations relating to the Plan as it may deem
necessary or advisable for the administration of the Plan.  With the consent of
the Optionee affected thereby, the Committee may amend or modify the terms of
any outstanding Incentive Stock Option or Non-Statutory Stock Option in any
manner, provided that the amended or modified terms are permitted by the Plan as
then in effect.  Without limiting the generality of the foregoing sentence, the
Committee may, with the consent of the Optionee affected thereby, modify the
exercise price, number of shares or other terms and conditions of an Incentive
Award, extend the term of an Incentive Award, accelerate the exercisability or
vesting or otherwise terminate any restrictions relating to an Incentive Award,
extend, renew or accept the surrender of any outstanding Incentive Stock Option
or Non-Statutory Stock Option, to the extent not previously exercised, and the
Committee may authorize the grant of new Options in substitution therefor to the
extent not previously exercised.

     Each determination, interpretation or other action made or taken by the
Committee pursuant to the provisions of the Plan shall be conclusive and binding
for all purposes and on all persons, including, without limitation, the Company
and its Subsidiaries, the shareholders of the Company, the Committee and each of
the members thereof, the directors, officers and employees of the Company and
its Subsidiaries, and the Optionees and their respective successors in interest.
No member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under the Plan.

                        ARTICLE 4.  SHARES SUBJECT TO THE PLAN

     4.1  NUMBER.  The maximum number of shares of Common Stock that shall be
reserved for issuance under the Plan shall be 500,000, subject to adjustment
upon changes in capitalization of the Company as provided in Section 4.3 below.
The maximum number of shares authorized may be increased from time to time by
approval of the Board and, if required pursuant to Rule 16b-3, Section 422A of
the Code, or the rules of any securities exchange or the NASD, or the
shareholders of the Company.  Shares of Common Stock that may be issued upon
exercise of Options shall be applied to reduce the maximum number of shares of
Common Stock remaining available for use under the Plan.

     4.2  UNUSED STOCK.  Any shares of Common Stock that are subject to an
Option (or any portion thereof) that lapses, expires or for any reason is
terminated unexercised shall automatically again become available for use under
the Plan.

     4.3  CHANGE IN SHARES, ADJUSTMENTS, ETC.  If the number of outstanding
shares of Common Stock is increased or decreased or changed into or exchanged
for a different number or kind of shares of stock or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization,


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reclassification, stock dividend, stock split, reverse stock split,
combination of shares, rights offering or any other change in the corporate
structure or shares of the Company, the Committee (or, if the Company is not
the surviving corporation in any such transaction, the board of directors of
the surviving corporation) shall make appropriate adjustment as to the number
and kind of securities subject to and reserved under the Plan and, in order
to prevent dilution or enlargement of the rights of Optionees, the number and
kind of securities subject to outstanding Options.  Any such adjustment in
any outstanding Option shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the Option but with an
appropriate adjustment in the price for each share or other unit of any
security covered by the Option.  However, no change shall be made in the
terms of any outstanding Incentive Stock Option as a result of any such
change in the corporate structure or shares of the Company, without the
consent of the Optionee affected thereby, that would disqualify that
Incentive Stock Option from treatment under Section 422 of the Code or would
be considered a modification, extension or renewal of an option under Section
424(h) of the Code.

                         ARTICLE 5.  ELIGIBILITY

     Incentive Stock Options or Non-Statutory Stock Options shall be granted
only to those Eligible Persons who, in the judgment of the Committee, are
performing, or during the term of an Option, will perform, vital services in
the management, operation and development of the Company or a Subsidiary, and
significantly contribute or are expected to significantly contribute to the
achievement of long-term corporate economic objectives.  Optionees may be
granted from time to time one or more Incentive Stock Options and/or
Non-Statutory Stock Options under the Plan, provided that only employees of
the Company or a Subsidiary may be granted Incentive Stock Options under the
Plan, in any case as may be determined by the Committee in its sole
discretion.  The number, type, terms and conditions of Options granted to
various Eligible Persons need not be uniform, consistent or in accordance
with any plan, whether or not such Eligible Persons are similarly situated.
The Committee may grant both an Incentive Stock Option and a Non-Statutory
Stock Option to the same Optionee at the same time or at different times.
Incentive Stock Options and Non-Statutory Stock Options, whether granted at
the same or different times, shall be deemed to have been awarded in separate
grants, shall be clearly identified, and in no event will the exercise of one
Option affect the right to exercise any other Option or affect the number of
shares of Common Stock for which any other Option may be exercised.  Upon
determination by the Committee that an Option is to be granted to an
Optionee, written notice shall be given such person specifying such terms,
conditions, rights and duties related thereto.  Each Optionee shall enter
into an agreement with the Company, in such form as the Committee shall
determine and which is consistent with the provisions of the Plan, specifying
the terms, conditions, rights and duties of Incentive Stock Options and
Non-Statutory Stock Options granted under the Plan. Options shall be deemed
to be granted as of the date specified in the grant resolution of the
Committee, which date shall be the date of the related agreement with the
Optionee.

                        ARTICLE 6.  DURATION AND EXERCISE

     6.1  MANNER OF OPTION EXERCISE.  An Option may be exercised by an Optionee
in whole or in part from time to time, subject to the conditions contained
herein and in the agreement evidencing such Option, by delivery, in person or
through certified or registered mail, of written notice of exercise to the
Company at its principal executive office (Attention:  Secretary), and by paying
in full the total Option exercise price for the shares of Common Stock purchased
in accordance with Section 6.3.  Such notice shall be in a form satisfactory to
the Committee and shall specify the particular Option (or portion thereof) that
is being exercised and the number of shares with respect to which the Option is
being exercised.  Subject to Section 9.1, the exercise of the Option shall be
deemed effective upon receipt of such notice and payment.  As soon as
practicable after the effective exercise of the Option, the Company shall record
on the stock transfer books of the Company the ownership of the shares purchased
in the name of the Optionee, and the Company shall deliver to the Optionee one
or more duly issued stock certificates evidencing such ownership.

     6.2  METHOD OF PAYMENT OF OPTION EXERCISE PRICE.  At the time of the
exercise of an Incentive Stock Option or a Non-Statutory Stock Option, the
Optionee may determine whether the total purchase price of the shares to be
purchased shall be paid solely in cash or by transfer from the Optionee to the
Company of previously acquired shares of Common Stock, or by a combination
thereof.  In the event the Optionee elects to pay the purchase price in whole or


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in part with previously acquired shares of Common Stock, the value of such
shares shall be equal to their Fair Market Value on the date of exercise.  The
Committee may reject an Optionee's election to pay all or part of the purchase
price with previously acquired shares of Common Stock and require such purchase
price to be paid entirely in cash if, in the sole discretion of the Committee,
payment in previously acquired shares would cause the Company to be required to
recognize a charge to earnings in connection therewith.  For purposes of this
Section 6.2, "previously acquired shares" shall include both shares of Common
Stock that are already owned by the Optionee at the time of exercise and shares
of Common Stock that are to be acquired pursuant to the exercise of the Option
concerned.  In its sole discretion, the Committee may determine either at the
time of grant or exercise of an Incentive Stock Option or a Non-Statutory Stock
Option, to permit a Optionee to pay all or any portion of the purchase price by
delivery of a promissory note in form and substance acceptable to the Committee.

     6.3  RIGHTS AS A SHAREHOLDER.  The Optionee shall have no rights as a
shareholder with respect to any shares of Common Stock covered by an Option
until the Optionee shall have become the holder of record of such shares, and no
adjustments shall be made for dividends or other distributions or other rights
as to which there is a record date preceding the date the Optionee becomes the
holder of record except as the Committee may determine pursuant to Section 4.3.

     6.4  INCENTIVE STOCK OPTIONS.

          (a)  INCENTIVE STOCK OPTION EXERCISE PRICE.  The per share price to be
     paid by the Optionee at the time an Incentive Stock Option is exercised
     will be determined by the Committee, but shall not be less than (i) 100% of
     the Fair Market Value of one share of Common Stock on the date the Option
     is granted, or (ii) 110% of the Fair Market Value of one share of Common
     Stock on the date the Option is granted if, at that time the Option is
     granted, the Optionee owns, directly or indirectly (as determined pursuant
     to Section 424(d) of the Code), more than 10% of the total combined voting
     power of all classes of stock of the Company, any Subsidiary or any parent
     corporation of the Company (within the meaning of Section 424(e) of the
     Code).

          (b)  AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK OPTIONS.
     Notwithstanding any other provision of the Plan, the aggregate Fair Market
     Value (determined as of the date an Incentive Stock Option is granted) of
     the shares of Common Stock with respect to which incentive stock options
     (within the meaning of Section 422 of the Code) are exercisable for the
     first time by an Optionee during any calendar year (under the Plan and any
     other incentive stock option plans of the Company, any Subsidiary or any
     parent corporation of the Company (within the meaning of Section 424(e) of
     the Code)) shall not exceed $100,000 (or such other amount as may be
     prescribed by the Code from time to time).

          (c)  DURATION OF INCENTIVE STOCK OPTIONS.  The period during which an
     Incentive Stock Option may be exercised shall be fixed by the Committee at
     the time such Option is granted, but in no event shall such period exceed
     ten years from the date the Option is granted or, in the case of an
     Optionee that owns, directly or indirectly (as determined pursuant to
     Section 424(d) of the Code) more than 10% of the total combined voting
     power of all classes of stock of the Company, any Subsidiary or any parent
     corporation of the Company (within the meaning of Section 424(e) of the
     Code), five years from the date the Incentive Stock Option is granted.  An
     Incentive Stock Option shall become exercisable at such times and in such
     installments (which may be cumulative) as shall be determined by the
     Committee at the time the Option is granted.  Upon the completion of its
     exercise period, an Incentive Stock Option, to the extent not then
     exercised, shall expire.  Except as otherwise provided in Articles 7 or 11,
     all Incentive Stock Options granted to an Optionee hereunder shall
     terminate and may no longer be exercised if the Optionee ceases to be an
     employee of the Company and all Subsidiaries or if the Optionee is an
     employee of a Subsidiary and the Subsidiary ceases to be a Subsidiary of
     the Company (unless the Optionee continues as an employee of the Company or
     another Subsidiary).

          (d)  DISPOSITION OF COMMON STOCK ACQUIRED PURSUANT TO THE EXERCISE OF
     INCENTIVE STOCK OPTIONS.  Prior to making a disposition (as defined in
     Section 424(c) of the Code) of any shares of Common


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     Stock acquired pursuant to the exercise of an Incentive Stock Option
     granted under the Plan before the expiration of two years after the date
     on which the Option was granted or before the expiration of one year
     after the date on which such shares of Common Stock were transferred to
     the Optionee pursuant to exercise of the Option, the Optionee shall send
     written notice to the Company of the proposed date of such disposition,
     the number of shares to be disposed of, the amount of proceeds to be
     received from such disposition and any other information relating to
     such disposition that the Company may reasonably request.  The right of
     an Optionee to make any such disposition shall be conditioned on the
     receipt by the Company of all amounts necessary to satisfy any federal,
     state or local withholding tax requirements attributable to such
     disposition.  The Committee shall have the right, in its sole
     discretion, to endorse the certificates representing such shares with a
     legend restricting transfer and to cause a stop transfer order to be
     entered with the Company's transfer agent until such time as the Company
     receives the amounts necessary to satisfy such withholding requirements
     or until the later of the expiration of two years from the date the
     Option was granted or one year from the date on which such shares were
     transferred to the Optionee pursuant to the exercise of the Option.

          (e)  WITHHOLDING TAXES.  The Company is entitled to withhold and
     deduct from future wages of the Optionee, or make other arrangements for
     the collection of, all legally required amounts necessary to satisfy any
     federal, state or local withholding tax requirements attributable to any
     action by the Optionee, including, without limitation, a disposition of
     shares of Common Stock described in Section 6.4(d) above, that causes the
     Incentive Stock Option to cease to qualify as an incentive stock option
     within the meaning of Section 422 of the Code.

     6.5  NON-STATUTORY STOCK OPTIONS.

          (a)  OPTION EXERCISE PRICE.  The per share price to be paid by the
     Optionee at the time a Non-Statutory Stock Option is exercised will be
     determined by the Committee, but shall not be less than 85% of the Fair
     Market Value of one share of Common Stock on the date the Option is
     granted.

          (b)  DURATION OF NON-STATUTORY STOCK OPTIONS.  The period during
     which a Non-Statutory Stock Option may be exercised shall be fixed by
     the Committee at the time such Option is granted, but in no event shall
     such period exceed 10 years and one month from the date the Option is
     granted. A Non-Statutory Stock Option shall become exercisable at such
     times and in such installments (which may be cumulative) as shall be
     determined by the Committee at the time the Option is granted.  Upon the
     completion of its exercise period, a Non-Statutory Stock Option, to the
     extent not then exercised, shall expire.  Except as otherwise provided
     in Articles  7 or 11, all Non-Statutory Stock Options granted hereunder
     to an Optionee who is an employee of the Company or any Subsidiaries
     shall terminate and may no longer be exercised if the Optionee ceases to
     be an employee of the Company or a Subsidiary or if the Optionee is an
     employee of a Subsidiary and the Subsidiary ceases to be a Subsidiary of
     the Company (unless the Optionee continues as an employee of the Company
     or another Subsidiary).  A Non-Statutory Stock Option granted hereunder
     to an Optionee who is not an employee of the Company or a Subsidiary
     will terminate as determined by the Committee at the time of grant.

          (c)  WITHHOLDING TAXES.

               (i) The Company is entitled to (aa) withhold and deduct from
          future wages of the Optionee, or make other arrangements for the
          collection of, all legally required amounts necessary to satisfy any
          federal, state or local withholding tax requirements attributable to
          the Optionee's exercise of a Non-Statutory Stock Option or otherwise
          incurred with respect to the Option, or (bb) require the Optionee
          promptly to remit the amount of such withholding to the Company before
          acting on the Optionee's notice of exercise of the Option.


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               (ii) The Committee may, in its discretion and subject to such
          rules as the Committee may adopt, permit an Optionee to satisfy, in
          whole or in part, any withholding tax obligation which may arise in
          connection with the exercise of a Non-Statutory Stock Option either
          by electing to have the Company withhold from the shares of Common
          Stock to be issued upon exercise that number of shares of Common
          Stock, or by electing to deliver to the Company already-owned
          shares of Common Stock, in either case having a Fair Market Value,
          on the date such tax is determined under the Code (the "Tax Date"),
          equal to the amount necessary to satisfy the withholding amount
          due.  An Optionee's election to have the Company withhold shares of
          Common Stock or to deliver already-owned shares of Common Stock
          upon exercise is irrevocable and is subject to the consent or
          disapproval of the Committee.  If the Optionee is an officer,
          director or beneficial owner of more than 10% of the outstanding
          Common Stock of the Company and at the time of exercise of the
          Option the Company has a class of equity securities registered
          under Section 12 of the Exchange Act, such election may not be made
          within six months of the date the Non-Statutory Stock Option is
          granted (unless the death or Disability of the Optionee occurs
          prior to the expiration of such six-month period), and must be made
          either six months prior to the Tax Date or between the third and
          twelfth business days following public release of any of the
          Company's quarterly or annual summary earnings statements.  When
          shares of Common Stock are issued prior to the Tax Date to an
          Optionee making such an election, the Optionee shall agree in
          writing to surrender that number of shares on the Tax Date having
          an aggregate Fair Market Value equal to the tax due.

              ARTICLE 7.  EFFECT OF TERMINATION OF EMPLOYMENT ON OPTIONS

     7.1  TERMINATION OF EMPLOYMENT OR OTHER SERVICE DUE TO DEATH, DISABILITY
OR RETIREMENT.  In the event an Optionee's employment or other service is
terminated with the Company and all Subsidiaries by reason of his death,
Disability or Retirement, all outstanding Incentive Stock Options and
Non-Statutory Stock Options then held by the Optionee shall become
immediately exercisable in full and remain exercisable for a period of three
months in the case of Retirement and one year in the case of death or
Disability, provided, however, that an exercise may not occur after the
expiration date thereof in any event.  The Company shall undertake to use its
best efforts to notify the Optionee or his heirs or representatives, as the
case may be, of the last date by which Options may be exercised pursuant to
this Section 7.1, at least thirty (30) days in the case of Retirement and at
least sixty (60) days in the case of death or Disability, prior to such date.

     7.2  TERMINATION OF EMPLOYMENT OR OTHER SERVICE FOR REASONS OTHER THAN
DEATH, DISABILITY OR RETIREMENT.

          (a)  Except as otherwise provided in Article 11 and subsection (b)
     below, in the event an Optionee's employment or other service is terminated
     with the Company and all Subsidiaries for any reason other than his death,
     Disability or Retirement, all rights of the Optionee under the Plan shall
     immediately terminate without notice of any kind and no Incentive Stock
     Option or Non-Statutory Stock Option then held by the Optionee shall
     thereafter be exercisable.

          (b)  Notwithstanding the provisions of Subsection (a) above, upon an
     Optionee's termination of employment or other service with the Company and
     all Subsidiaries, the Committee may, in its sole discretion (which may be
     exercised before or following such termination), cause Incentive Stock
     Options and Non-Statutory Stock Options then held by such Optionee to
     become exercisable and to remain exercisable following such termination of
     employment or other service in the manner determined by the Committee;
     provided, however, that no Option shall be exercisable after the expiration
     date thereof in any event, and any Incentive Stock Option that remains
     unexercised more than three months following termination of employment
     shall thereafter be deemed to be a Non-Statutory Stock Option.


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     7.3  DATE OF TERMINATION.  For purposes of the Plan, an Optionee's
employment or other service shall be deemed to have terminated on the date that
the Optionee ceases to perform services for the Company or the last day of the
pay period covered by the Optionee's final paycheck, as the case may be.
Notwithstanding the foregoing, the employee Optionee shall not be deemed to have
ceased to be an employee for purposes of the Plan until the later of the 91st
day of any bona fide leave of absence approved by the Company or a Subsidiary
for the Optionee (including, without limitation any layoff) or the expiration of
the period of any bona fide leave of absence approved by the Company or a
Subsidiary for the Optionee (including without limitation any layoff) during
which the Optionee's right to reemployment is guaranteed either by statute or
contract.

                      ARTICLE 8.  RIGHTS OF EMPLOYEES; OPTIONEES

     8.1  EMPLOYMENT.  Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Subsidiary to terminate the employment of
any Eligible Person or Optionee at any time, nor confer upon any Eligible Person
or Optionee any right to continue in the employ of the Company or any
Subsidiary.

     8.2  NONTRANSFERABILITY.  No right or interest of any Optionee in an Option
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Optionee, either voluntarily or involuntarily, or subjected to
any lien, directly or indirectly, by operation of law, or otherwise, including
execution, levy, garnishment, attachment, pledge or bankruptcy.  In the event of
an Optionee's death, an Optionee's rights and interest in any Options shall be
transferable by testamentary will or the laws of descent and distribution, and
payment of any amounts due under the Plan shall be made to, and exercise of any
Options (to the extent permitted pursuant to Section 7.1) may be made by, the
Optionee's legal representatives, heirs or legatees.  If in the opinion of the
Committee an Optionee holding any Option is disabled from caring for his or her
affairs because of mental condition, physical condition or age, any payments due
the Optionee may be made to, and any rights of the Optionee under the Plan shall
be exercised by, such Optionee's guardian, conservator or other legal personal
representative upon furnishing the Committee with evidence satisfactory to the
Committee of such status.

     8.3  NON-EXCLUSIVITY OF THE PLAN.  Nothing contained in the Plan is
intended to amend, modify or rescind any previously approved compensation plans
or programs entered into by the Company.  The Plan will be construed to be an
addition to any and all such other plans or programs.  Neither the adoption of
the Plan nor the submission of the Plan to the shareholders of the Company for
approval will be construed as creating any limitations on the power or authority
of the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.

                 ARTICLE 9.  SHARE ISSUANCE AND TRANSFER RESTRICTIONS

     9.1  SHARE ISSUANCES.  Notwithstanding any other provision of the Plan or
any agreements entered into pursuant hereto, the Company shall not be required
to issue or deliver any certificate for shares of Common Stock under this Plan
(and an Option shall not be considered to be exercised, notwithstanding the
tender by the Optionee of any consideration therefor), unless and until each of
the following conditions has been fulfilled:

          (a) (i) there shall be in effect with respect to such shares a
     registration statement under the Securities Act and any applicable state
     securities laws if the Committee, in its sole discretion, shall have
     determined to file, cause to become effective and maintain the
     effectiveness of such registration statement; or (ii) if the Committee has
     determined not to so register the shares of Common Stock to be issued under
     the Plan, (A) exemptions from registration under the Securities Act and
     applicable state securities laws shall be available for such issuance (as
     determined by counsel to the Company) and (B) there shall have been
     received from the Optionee (or, in the event of death or disability, the
     Optionee's heir(s) or legal representative(s)) any representations or
     agreements requested by the Company in order to permit such issuance to be
     made pursuant to such exemptions; and


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          (b)  there shall have been obtained any other consent, approval or
     permit from any state or federal governmental agency which the Committee
     shall, in its sole discretion upon the advice of counsel, deem necessary or
     advisable.

     9.2  SHARE TRANSFER.  Shares  of Common Stock issued pursuant to the
exercise of Options granted under the Plan may not be sold, assigned,
transferred, pledged, encumbered or otherwise disposed of (whether voluntarily
or involuntarily) except pursuant to registration under the Securities Act and
applicable state securities laws or pursuant to exemptions from such
registrations.  The Company may condition the sale, assignment, transfer,
pledge, encumbrance or other disposition of such shares not issued pursuant to
an effective and current registration statement under the Securities Act and all
applicable state securities laws on the receipt from the party to whom the
shares of Common Stock are to be so transferred of any representations or
agreements requested by the Company in order to permit such transfer to be made
pursuant to exemptions from registration under the Securities Act and applicable
state securities laws.

     9.3  LEGENDS.  Unless a registration statement under the Securities Act is
in effect with respect to the issuance or transfer of shares of Common Stock
issued under the Plan, each certificate representing any such shares shall be
endorsed with a legend in substantially the following form, unless counsel for
the Company is of the opinion as to any such certificate that such legend is
unnecessary:

     THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR UNDER APPLICABLE
     STATE SECURITIES LAWS.  THESE SECURITIES HAVE BEEN ACQUIRED FOR
     INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
     TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
     PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
     STATE LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT
     AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
     THE  SATISFACTION OF THE COMPANY.

              ARTICLE 10.  PLAN AMENDMENT, MODIFICATION AND TERMINATION

     The Board may suspend or terminate the Plan or any portion thereof at any
time, and may amend the Plan from time to time in such respects as the Board may
deem advisable in order that Incentive Stock Options and Non-Statutory Stock
Options under the Plan shall conform to any change in applicable laws or
regulations or in any other respect the Board may deem to be in the best
interests of the Company; provided, however, that no such amendment, without
approval of the shareholders of the Company, may (a) materially increase the
benefits accruing to Optionees under the Plan, (b) increase the total number of
shares of Common Stock as to which Options may be granted under the Plan, except
as provided in Section 4.3 of the Plan, or (c) materially modify the
requirements as to eligibility for participation in the Plan.  No termination,
suspension or amendment of the Plan shall alter or impair any outstanding Option
without the consent of the Optionee affected thereby; provided, however, that
this sentence shall not impair the right of the Committee to take whatever
action it deems appropriate under Section 4.3.

                            ARTICLE 11.  CHANGE IN CONTROL

     If, during the term of an Option, (i) the Company merges or consolidates
with any other corporation and is not the surviving corporation after such
merger or consolidation; (ii) the Company transfers all or substantially all of
its business and assets to any other person; or (iii) more than 50% of the
Company's outstanding voting shares are purchased by any other person, the
Committee may, in its sole discretion, provide for the acceleration of the right
to exercise the option prior to the anticipated effective date of any of the
foregoing transactions or take any other action as it may deem appropriate to
further the purposes of this Plan or protect the interests of the Optionee.


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                       ARTICLE 12.  EFFECTIVE DATE OF THE PLAN

     12.1 EFFECTIVE DATE.  The Plan is effective as of July 31, 1997, the
effective date it was adopted by the Board subject to the approval of the
shareholders within 12 months.  Options may be granted under the Plan prior to
shareholder approval if made subject to shareholder approval.

     12.2 DURATION OF THE PLAN.  The Plan shall terminate at midnight on
July 30, 2007 and may be terminated prior thereto by Board action, and no
Options shall be granted after such termination.  Options outstanding upon
termination of the Plan may continue to be exercised in accordance with their
terms.


                              ARTICLE 13.  MISCELLANEOUS

     13.1 GOVERNING LAW.  The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of  Minnesota
without regard to the conflict of laws provisions of any jurisdictions.  All
parties agree to submit to the jurisdiction of the state and federal courts of
Minnesota with respect to matters relating to the Plan and agree not to raise or
assert the defense that such forum is not convenient for such party.

     13.2 GENDER AND NUMBER.  Except when otherwise indicated by the context,
reference to the masculine gender in the Plan shall include, when used, the
feminine gender and any term used in the singular shall also include the plural.

     13.3 CONSTRUCTION.  Wherever possible, each provision of this Plan shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Plan shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Plan.

     13.4 SUCCESSORS AND ASSIGNS.  This Plan shall be binding upon and inure to
the benefit of the successors and permitted assigns of the Company, including,
without limitation, whether by way of merger, consolidation, operation of law,
assignment, purchase or other acquisition of substantially all of the assets or
business of the Company, and any and all such successors and assigns shall
absolutely and unconditionally assume all of the Company's obligations under the
Plan.

     13.5 SURVIVAL OF PROVISIONS.  The rights, remedies, agreements, obligations
and covenants contained in or made pursuant to the Plan, any agreement
evidencing an Incentive Award and any other notices or agreements in connection
therewith, including, without limitation, any notice of exercise of an Option,
shall survive the execution and delivery of such notices and agreements and the
delivery and receipt of shares of Common Stock and shall remain in full force
and effect.





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