EXHIBIT
10.16


 


INCENTIVE STOCK OPTION
AGREEMENT


 


ZOMAX, INC.


2004 EQUITY
INCENTIVE PLAN


 


 


THIS AGREEMENT, made effective
as of this ____ day of _____________, 20____, by and between Zomax, Inc., a
Minnesota corporation (the “Company”), and _______________________________ (“Participant”).


 


W I T N E S S E T H:


 


                WHEREAS, Participant on the date
hereof is a key employee or officer of the Company or one of its Subsidiaries;
and


 


                WHEREAS, the Company wishes to
grant an incentive stock option to Participant to purchase shares of the
Company’s Common Stock pursuant to the Company’s 2004 Equity Incentive Plan
(the “Plan”); and


 


                WHEREAS, the Board of Directors
has authorized the grant of an incentive stock option to Participant and has
determined that, as of the effective date of this Agreement, the fair market
value of the Company’s Common Stock is $          per share;


 


                NOW, THEREFORE, in consideration
of the premises and of the mutual covenants herein contained, the parties
hereto agree as follows:


 


                1.             Grant of Option.  The Company hereby grants to Participant on
the date set forth above (the “Date of Grant”), the right and option (the “Option”)
to purchase all or portions of an aggregate of                                                (                ) shares of Common Stock at
a per share price of $             on the terms and conditions set forth herein,
and subject to adjustment pursuant to Section 12 of the Plan.  This Option is intended to be an incentive
stock option within the meaning of Section 422, or any successor provision, of
the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
thereunder, to the extent permitted under Code Section 422(d).


 


                2.             Duration and
Exercisability.


 


                                a.             General.  The term during which this Option may be
exercised shall terminate on the close of business on                             ,       , except as
otherwise provided in Paragraphs 2(b) through 2(d) below.  This Option shall become exercisable
according to the following schedule:


 


 





















 




	
  Vesting Date

  	
  Number of Shares

  






 


 


 


 


 


 


Once
the Option becomes exercisable to the extent of one hundred percent (100%) of
the aggregate number of shares specified in Paragraph 1, Participant may
continue to exercise this Option under the terms and conditions of this
Agreement until the termination of the Option as provided herein.  If Participant does not purchase upon an
exercise of this Option the full number of shares which Participant is then
entitled to purchase, Participant may purchase upon any subsequent exercise
prior to this Option’s termination such previously unpurchased shares in
addition to those Participant is otherwise entitled to purchase.


 


                                b.             Termination
of Employment (other than Disability or Death).  If Participant’s employment with the Company
or any Subsidiary is terminated for any reason other than disability or death,
this Option shall completely terminate on the earlier of (i) the close of
business on the three-month anniversary date of
such termination of employment, and (ii) the expiration date of this
Option stated in Paragraph 2(a) above. 
In such period following the termination of Participant’s employment,
this Option shall be exercisable only to the extent the Option was exercisable
on the vesting date immediately preceding such termination of employment, but
had not previously been exercised.  To
the extent this Option was not exercisable upon such termination of employment,
or if Participant  does not exercise the
Option within the time specified in this Paragraph 2(b), all rights of
Participant under this Option shall be forfeited.


 


                                c.             Disability.  If Participant’s employment terminates
because of disability (as defined in Code Section 22(e), or any successor
provision), this Option shall terminate on the earlier of (i) the close of
business on the twelve-month anniversary date of
the such termination of employment, and (ii) the expiration date of this Option
stated in Paragraph 2(a) above. In such period following the termination of
Participant’s employment, this Option shall be exercisable only to the extent
the Option was exercisable on the vesting date immediately preceding such
termination of employment, but had not previously been exercised.  To the extent this Option was not exercisable
upon such termination of employment, or if Participant does not exercise the
Option within the time specified in this Paragraph 2(c), all rights of
Participant under this Option shall be forfeited.


 


                                d.             Death.  In the event of Participant’s death, this
Option shall terminate on the earlier of (i) the close of business on the twelve-month anniversary date of the date of Participant’s
death, and (ii) the expiration date of this Option stated in Paragraph 2(a)
above.  In such period following
Participant’s death, this Option shall be exercisable by the person or persons
to whom Participant’s rights under this Option shall have passed by Participant’s
will or by the laws of descent and distribution only to the extent the Option
was exercisable on the vesting date immediately preceding the date of Participant’s
death. To the extent this Option was not exercisable


 


 


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upon
the date of Participant’s death, or if such person or persons do not exercise
this Option within the time specified in this Paragraph 2(d), all rights under
this Option shall be forfeited.


 


                3.               Manner of Exercise.


 


                                a.             General.  The Option may be exercised only by
Participant (or other proper party in the event of death or incapacity),
subject to the conditions of the Plan and subject to such other administrative
rules as the Board may deem advisable, by delivering within the Option Period
written notice of exercise to the Company at its principal office. The notice
shall state the number of shares as to which the Option is being exercised and
shall be accompanied by payment in full of the Option price for all shares
designated in the notice.  The exercise
of the Option shall be deemed effective upon receipt of such notice by the
Company and upon payment that complies with the terms of the Plan and this
Agreement.  The Option may be exercised
with respect to any number or all of the shares as to which it can then be
exercised and, if partially exercised, may be so exercised as to the
unexercised shares any number of times during the Option period as provided
herein.


 


                                b.             Form of
Payment.  Subject to
approval by the Administrator, payment of the option price by Participant shall
be in the form of cash, personal check, certified check or previously acquired
shares of Common Stock of the Company, or any combination thereof.  Any stock so tendered as part of such payment
shall be valued at its Fair Market Value as provided in the Plan.  For purposes of this Agreement, “previously
acquired shares of Common Stock” shall include shares of Common Stock that are
already owned by Participant at the time of exercise.


 


                                c.             Stock
Transfer Records.  As soon
as practicable after the effective exercise of all or any part of the Option,
Participant shall be recorded on the stock transfer books of the Company as the
owner of the shares purchased, and the Company shall deliver to Participant one
or more duly issued stock certificates evidencing such ownership.  All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.


 


                4.             Miscellaneous.


 


                                a.             Employment;
Rights as Shareholder. 
This Agreement shall not confer on Participant any right with respect to
continuance of employment by the Company or any of its Subsidiaries, nor will
it interfere in any way with the right of the Company to terminate such
employment.  Participant shall have no
rights as a shareholder with respect to shares subject to this Option until
such shares have been issued to Participant upon exercise of this Option.  No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such shares are issued, except as provided in Section 12 of the Plan.


 


                                b.             Securities
Law Compliance.  The
exercise of all or any parts of this Option shall only be effective at such
time as counsel to the Company shall have determined that the issuance and
delivery of Common Stock pursuant to such exercise will not violate any state
or federal securities or other laws. 
Participant may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is 


 


 


3





















 


registered
and freely tradable under applicable state and federal securities laws, for
Participant’s own account without a view to any further distribution thereof,
that the certificates for such shares shall bear an appropriate legend to that
effect and that such shares will be not transferred or disposed of except in
compliance with applicable state and federal securities laws.


 


                                c.             Mergers,
Recapitalizations, Stock Splits, Etc.  Pursuant and subject to Section 12 of the
Plan, certain changes in the number or character of the Common Stock of the
Company (through sale, merger, consolidation, exchange, reorganization,
divestiture (including a spin-off), liquidation, recapitalization, stock split,
stock dividend or otherwise) shall result in an adjustment, reduction or
enlargement, as appropriate, in Participant’s rights with respect to any
unexercised portion of the Option (i.e., Participant shall have such “anti-dilution”
rights under the Option with respect to such events, but shall not have “preemptive”
rights).


 


                                d.             Shares
Reserved.  The Company
shall at all times during the option period reserve and keep available such
number of shares as will be sufficient to satisfy the requirements of this
Agreement.


 


                                e.             Withholding
Taxes on Disqualifying Disposition.  In the event of a


disqualifying
disposition of the shares acquired through the exercise of this Option,
Participant hereby agrees to inform the Company of such disposition.  Upon notice of a disqualifying disposition,
the Company may take such action as it deems appropriate to insure that, if
necessary to comply with all applicable federal or state income tax laws or
regulations, all applicable federal and state payroll, income or other taxes
are withheld from any amounts payable by the Company to Participant.  If the Company is unable to withhold such
federal and state taxes, for whatever reason, Participant hereby agrees to pay
to the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal or state law.  Participant may, subject to the approval and
discretion of the Board or such administrative rules it may deem advisable,
elect to have all or a portion of such tax withholding obligations satisfied by
delivering shares of the Company’s Common Stock or by electing to have the
Company withhold shares
of Common Stock otherwise issuable to Participant.  Such shares shall have a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to the supplemental income resulting from the disqualifying
disposition of the shares acquired through the exercise of this Option.  In no event may the Company withhold shares
having a Fair Market Value in excess of such statutory minimum required tax
withholding.


 


                                f.              Nontransferability.  During the lifetime of Participant, the
accrued Option shall be exercisable only by Participant or by the Participant’s
guardian or other legal representative, and shall not be assignable or
transferable by Participant, in whole or in part, other than by will or by the
laws of descent and distribution.


 


                                g.             2004
Equity Incentive Plan. 
The Option evidenced by this Agreement is granted pursuant to the Plan,
a copy of which Plan has been made available to Participant and is hereby
incorporated into this Agreement.  This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan.  The Plan governs this
Option and, in the  event of any


 


 


4





















 


questions
as to the construction of this Agreement or in the event of a conflict between
the Plan and this Agreement, the Plan shall govern, except as the Plan
otherwise provides.


 


                                h.             Lockup
Period Limitation. 
Participant agrees that in the event the Company advises Participant
that it plans an underwritten public offering of its Common Stock in compliance
with the Securities Act of 1933, as amended, and that the underwriter(s) seek
to impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of part or all
of their stock purchase rights of the underlying Common Stock, Participant
hereby agrees that for a period not to exceed 180 days from the prospectus,
Participant will not sell or contract to sell or grant an option to buy or
otherwise dispose of this option or any of the underlying shares of Common Stock
without the prior written consent of the underwriter(s) or its
representative(s).


 


                                i.              Blue Sky
Limitation. 
Notwithstanding anything in this Agreement to the contrary, in the event
the Company makes any public offering of its securities and determines in its
sole discretion that it is necessary to reduce the number of issued but
unexercised stock purchase rights so as to comply with any state securities or
Blue Sky law limitations with respect thereto, the Board of Directors of the
Company shall have the right (i) to accelerate the exercisability of this
Option and the date on which this Option must be exercised, provided that the
Company gives Participant 15 days’ prior written notice of such acceleration,
and (ii) to cancel any portion of this Option or any other option granted to
Participant pursuant to the Plan which is not exercised prior to or
contemporaneously with such public offering. 
Notice shall be deemed given when delivered personally or when deposited
in the United States mail, first class postage prepaid and addressed to
Participant at the address of Participant on file with the Company.


 


                                j.              Accounting
Compliance.  Participant
agrees that, if a merger, reorganization, liquidation or other “transaction” as
defined in Section 12 of the Plan occurs and Participant is an “affiliate” of
the Company or any Subsidiary (as defined in applicable legal and accounting
principles) at the time of such transaction, Participant will comply with all
requirements of Rule 145 of the Securities Act of 1933, as amended, and the
requirements of such other legal or accounting principles, and will execute any
documents necessary to ensure such compliance.


 


                                k.             Stock
Legend.  The Board may
require that the certificates for any shares of Common Stock purchased by
Participant (or, in the case of death, Participant’s successors) shall bear an
appropriate legend to reflect the restrictions of Paragraph 4(b) and Paragraphs
4(h) through 4(j) of this Agreement.


 


                                l.              Binding
Agreement.  This Agreement
shall bind and inure to the benefit of the Company and its successors and
assigns and Participant and any successor or successors of Participant
permitted by Paragraph 2 or Paragraph 4(f) above.  This Option is expressly subject to all terms
and conditions contained in the Plan and in this Agreement, and Participant’s
failure to execute this Agreement shall not relieve Participant from complying
with such terms and conditions.


 


                                m.            Arbitration.  Any dispute arising out of or relating to
this Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, 


 


 


5





















 


shall
be discussed between the disputing parties in a good faith effort to arrive at
a mutual settlement of any such controversy. 
If, notwithstanding, such dispute cannot be resolved, such dispute shall
be settled by binding arbitration. 
Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.  The
arbitrator shall be a retired state or federal judge or an attorney who has
practiced securities or business litigation for at least 10 years.  If the parties cannot agree on an arbitrator
within 20 days, any party may request that the chief judge of the District
Court for Hennepin County, Minnesota, select an arbitrator.  Arbitration will be conducted pursuant to the
provisions of this Agreement, and the commercial arbitration rules of the
American Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement.  Limited
civil discovery shall be permitted for the production of documents and taking
of depositions.  Unresolved discovery
disputes may be brought to the attention of the arbitrator who may dispose of
such dispute.  The arbitrator shall have
the authority to award any remedy or relief that a court of this state could
order or grant; provided, however, that punitive or exemplary damages shall not
be awarded.  The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of its costs
and fees, including the arbitrator’s fees, administrative fees, travel
expenses, out-of-pocket expenses and reasonable 
attorneys’ fees.  Unless otherwise
agreed by the parties, the place of any arbitration proceedings shall be
Hennepin County, Minnesota.


 


 


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NONQUALIFIED STOCK OPTION
AGREEMENT


 


ZOMAX,
INC.


2004
EQUITY INCENTIVE PLAN


 


 


                THIS
AGREEMENT, made effective as of this        day of ___________, 20__, by and between Zomax,
Inc., a Minnesota corporation (the “Company”), and ______________ (“Participant”).


 


 


W I T N E S S E T H:


 


                WHEREAS, Participant on the date
hereof is a key employee, officer, consultant or outside director of the
Company or one of its Subsidiaries; and


 


                WHEREAS, the Company wishes to
grant a nonqualified stock option to Participant to purchase shares of the
Company’s Common Stock pursuant to the Company’s 2004 Equity Incentive Plan
(the “Plan”); and


 


                WHEREAS, the Board of Directors
has authorized the grant of a nonqualified stock option to Participant and has
determined that, as of the effective date of this Agreement, the fair market
value of the Company’s Common Stock is $____ per share;


 


                NOW, THEREFORE, in consideration
of the premises and of the mutual covenants herein contained, the parties
hereto agree as follows:


 


                1.             Grant of Option.  The Company hereby grants to Participant on
the date set forth above (the “Date of Grant”), the right and option (the “Option”)
to purchase all or portions of an aggregate of ____________(__________) shares
of Common Stock at a per share price of $_____ on the terms and conditions set
forth herein, and subject to adjustment pursuant to Section 12 of the
Plan.  This Option is a nonqualified
stock option and will not be treated as an incentive stock option, as defined
under Section 422, or any successor provision, of the Internal Revenue Code of
1986, as amended (the “Code”), and the regulations thereunder.


 


                2.             Duration and
Exercisability.


 


                                a.             General.  The term during which this Option may be
exercised shall terminate on the close of business on                             ,       , except as
otherwise provided in Paragraphs 2(b) through 2(d) below.  This Option shall become exercisable
according to the following schedule:


 





















 




	
  Vesting Date

  	
  Number/Percentage of Shares

  






 


 


 


 


 


 


Once
the Option becomes fully exercisable, Participant may continue to exercise this
Option under the terms and conditions of this Agreement until the termination
of the Option as provided herein.  If
Participant does not purchase upon an exercise of this Option the full number
of shares which Participant is then entitled to purchase, Participant may
purchase upon any subsequent exercise prior to this Option’s termination such
previously unpurchased shares in addition to those Participant is otherwise
entitled to purchase.


 


                                b.             Termination
of Relationship (other than Disability or Death).  If Participant ceases to be [an employee] [an
outside director] [a consultant] of the Company or any Subsidiary for any
reason other than disability or death, this Option shall completely terminate
on the earlier of (i) the close of business on the three-month
anniversary date of the termination of such relationship, and
(ii) the expiration date of this Option stated in Paragraph 2(a)
above.  In such period following such
termination, this Option shall be exercisable only to the extent the Option was
exercisable on the vesting date immediately preceding the date on which Participant’s
relationship with the Company or Subsidiary has terminated, but had not
previously been exercised.  To the extent
this Option was not exercisable upon the termination of such relationship, or
if Participant does not exercise the Option within the time specified in this
Paragraph 2(b), all rights of Participant under this Option shall be forfeited.


 


                                c.             Disability.  If Participant ceases to be [an employee] [an
outside director] [a consultant] of the Company or any Subsidiary because of
disability (as defined in Code Section 22(e), or any successor provision), this
Option shall completely terminate on the earlier of (i) the close of business
on the twelve-month anniversary date of the
termination of all such relationships, and (ii) the expiration date of
this Option stated in Paragraph 2(a) above. 
In such period following such termination, this Option shall be
exercisable only to the extent the Option was exercisable on the vesting date
immediately preceding the date on which all of Participant’s relationships with
the Company or Subsidiary have terminated, but had not previously been
exercised.  To the extent this Option was
not exercisable upon the termination of such relationship, or if Participant
does not exercise the Option within the time specified in this Paragraph 2(c),
all rights of Participant under this Option shall be forfeited.


 


                                d.             Death.  In the event of Participant’s death, this
Option shall terminate on the earlier of (i) the close of business on the twelve-month anniversary date of the date of Participant’s
death, and (ii) the expiration date of this Option stated in Paragraph 2(a)
above.  In such period following
Participant’s death, this Option may be exercised by the person or persons to
whom Participant’s  rights under this
Option shall have passed by Participant’s will or by the laws of descent and
distribution only to the extent the Option was exercisable on the vesting date
immediately preceding the date of Participant’s death.  To the extent this Option was not exercisable


 


 


2





















 


upon
the date of Participant’s death, or if such person or persons fail to exercise
this Option within the time specified in this Paragraph 2(d), all rights under
this Option shall be forfeited.


 


                3.               Manner of Exercise.


 


                                a.             General.  The Option may be exercised only by
Participant (or other proper party in the event of death or incapacity),
subject to the conditions of the Plan and subject to such other administrative
rules as the Board may deem advisable, by delivering within the option period
written notice of exercise to the Company at its principal office.  The notice shall state the number of shares
as to which the Option is being exercised and shall be accompanied by payment
in full of the option price for all shares designated in the notice.  The exercise of the Option shall be deemed
effective upon receipt of such notice by the Company and upon payment that
complies with the terms of the Plan and this Agreement.  The Option may be exercised with respect to
any number or all of the shares as to which it can then be exercised and, if
partially exercised, may be exercised as to the unexercised shares any number
of times during the option period as provided herein.


 


                                b.             Form of
Payment.  Subject to the
approval of the Administrator, payment of the option price by Participant shall
be in the form of cash, personal check, certified check or previously acquired
shares of Common Stock of the Company, or any combination thereof.  Any stock so tendered as part of such payment
shall be valued at its Fair Market Value as provided in the Plan.  For purposes of this Agreement, “previously
acquired shares of Common Stock” shall include shares of Common Stock that are
already owned by Participant at the time of exercise.


 


                                c.             Stock
Transfer Records.  As soon
as practicable after the effective exercise of all or any part of the Option,
Participant shall be recorded on the stock transfer books of the Company as the
owner of the shares purchased, and the Company shall deliver to Participant one
or more duly issued stock certificates evidencing such ownership.  All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.


 


                4.             Miscellaneous.


 


                                a.             Rights as
Shareholder.  This
Agreement shall not confer on Participant any right with respect to the
continuance of any relationship with the Company or any of its Subsidiaries,
nor will it interfere in any way with the right of the Company to terminate any
such relationship.  Participant shall
have no rights as a shareholder with respect to shares subject to this Option
until such shares have been issued to Participant upon exercise of this
Option.  No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such shares are issued, except as provided in Section 12 of the Plan.


 


                                b.             Securities
Law Compliance.  The
exercise of all or any parts of this Option shall only be effective at such
time as counsel to the Company shall have determined that the issuance and
delivery of Common Stock pursuant to such exercise will not violate any state
or federal securities or other laws. 
Participant may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is 


 


 


3





















 


registered
and freely tradable under applicable state and federal securities laws, for
Participant’s own account without a view to any further distribution thereof
and that such shares will be not transferred or disposed of except in
compliance with applicable state and federal securities laws.


 


                                c.             Mergers,
Recapitalizations, Stock Splits, Etc.  Pursuant and subject to Section 12 of the
Plan, certain changes in the number or character of the Common Stock of the
Company (through sale, merger, consolidation, exchange, reorganization,
divestiture (including a spin-off), liquidation, recapitalization, stock split,
stock dividend or otherwise) shall result in an adjustment, reduction or
enlargement, as appropriate, in Participant’s rights with respect to any
unexercised portion of the Option (i.e., Participant shall have such “anti-dilution”
rights under the Option with respect to such events, but shall not have “preemptive”
rights).


 


                                d.             Shares
Reserved.  The Company
shall at all times during the option period reserve and keep available such
number of shares as will be sufficient to satisfy the requirements of this
Agreement.


 


                                e.             Withholding Taxes.  In order to permit the Company to comply with
all applicable federal or state income tax laws or regulations, the Company may
take such action as it deems appropriate to insure that, if necessary, all
applicable federal or state payroll, income or other taxes are withheld from
any amounts payable by the Company to Participant.  If the Company is unable to withhold such
federal and state taxes, for whatever reason, Participant hereby agrees to pay
to the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal or state law.  Participant may, subject to the approval and
discretion of the Board or such administrative rules it may deem advisable,
elect to have all or a portion of such tax withholding obligations satisfied by
delivering shares of the Company’s Common Stock or by electing to have the
Company withhold shares
of Common Stock otherwise issuable to Participant.  Such shares shall have a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to the supplemental income resulting from the exercise of
this Option.  In no event may the Company
withhold shares having a Fair Market Value in excess of such statutory minimum
required tax withholding.


 


                                f.              Nontransferability.  During the lifetime of Participant, the
accrued Option shall be exercisable only by Participant or by the Participant’s
guardian or other legal representative, and shall not be assignable or
transferable by Participant, in whole or in part, other than by will or by the
laws of descent and distribution.


 


                                g.             2004
Equity Incentive Plan. 
The Option evidenced by this Agreement is granted pursuant to the Plan,
a copy of which Plan has been made available to Participant and is hereby
incorporated into this Agreement.  This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan. All
defined terms of the Plan shall have the same meaning when used in this
Agreement.  The Plan governs this Option and, in the event of any questions as to
the construction of this Agreement or in the event of a conflict between the
Plan and this Agreement, the Plan shall govern, except as the Plan otherwise
provides.


 


 


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                                h.             Lockup
Period Limitation. 
Participant agrees that in the event the Company advises Participant
that it plans an underwritten public offering of its Common Stock in compliance
with the Securities Act of 1933, as amended, and that the underwriter(s) seek
to impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of part or all
of their stock purchase rights of the underlying Common Stock, Participant
hereby agrees that for a period not to exceed 180 days from the prospectus,
Participant will not sell or contract to sell or grant an option to buy or
otherwise dispose of this option or any of the underlying shares of Common
Stock without the prior written consent of the underwriter(s) or its
representative(s).


 


                                i.              Blue Sky
Limitation.  Notwithstanding
anything in this Agreement to the contrary, in the event the Company makes any
public offering of its securities and determines in its sole discretion that it
is necessary to reduce the number of issued but unexercised stock purchase
rights so as to comply with any state securities or Blue Sky law limitations
with respect thereto, the Board of Directors of the Company shall have the
right (i) to accelerate the exercisability of this Option and the date on which
this Option must be exercised, provided that the Company gives Participant 15
days’ prior written notice of such acceleration, and (ii) to cancel any portion
of this Option or any other option granted to Participant pursuant to the Plan
which is not exercised prior to or contemporaneously with such public
offering.  Notice shall be deemed given
when delivered personally or when deposited in the United States mail, first
class postage prepaid and addressed to Participant at the address of
Participant on file with the Company.


 


                                j.              Accounting
Compliance.  Participant
agrees that, if a merger, reorganization, liquidation or other “transaction” as
defined in Section 12 of the Plan occurs and Participant is an “affiliate” of
the Company or any Subsidiary (as defined in applicable legal and accounting
principles) at the time of such transaction, Participant will comply with all
requirements of Rule 145 of the Securities Act of 1933, as amended, and the
requirements of such other legal or accounting principles, and will execute any
documents necessary to ensure such compliance.


 


                                k.             Stock
Legend.  The Board may
require that the certificates for any shares of Common Stock purchased by
Participant (or, in the case of death, Participant’s successors) shall bear an
appropriate legend to reflect the restrictions of Paragraph 4(b) and Paragraphs
4(h) through 4(j) of this Agreement.


 


                                l.              Binding
Agreement.  This Agreement
shall bind and inure to the benefit of the Company and its successors and
assigns and Participant and any successor or successors of Participant
permitted by Paragraph 2 or Paragraph 4(f) above.  This Option is expressly subject to all terms
and conditions contained in the Plan and in this Agreement, and Participant’s
failure to execute this Agreement shall not relieve Participant from complying
with such terms and conditions


 


                                m.            Arbitration.  Any dispute arising out of or relating to
this Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the disputing
parties in a good faith effort to arrive at a mutual settlement of any such
controversy.  If, notwithstanding, such
dispute cannot be resolved, such dispute shall be settled by binding
arbitration.  Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  The arbitrator shall be a
retired state or federal judge or an


 


 


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attorney
who has practiced securities or business litigation for at least 10 years.  If the parties cannot agree on an arbitrator
within 20 days, any party may request that the chief judge of the District
Court for Hennepin County, Minnesota, select an arbitrator.  Arbitration will be conducted pursuant to the
provisions of this Agreement, and the commercial arbitration rules of the
American Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement.  Limited
civil discovery shall be permitted for the production of documents and taking
of depositions.  Unresolved discovery
disputes may be brought to the attention of the arbitrator who may dispose of
such dispute.  The arbitrator shall have
the authority to award any remedy or relief that a court of this state could
order or grant; provided, however, that punitive or exemplary damages shall not
be awarded.  The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of its costs
and fees, including the arbitrator’s fees, administrative fees, travel
expenses, out-of-pocket expenses and reasonable 
attorneys’ fees.  Unless otherwise
agreed by the parties, the place of any arbitration proceedings shall be
Hennepin County, Minnesota.


 


 


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