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                              TRICORD SYSTEMS, INC.

                            1998 STOCK INCENTIVE PLAN

               (AS AMENDED DECEMBER 7, 1998 AND JANUARY 30, 1999)


1.     PURPOSE OF PLAN.

The purpose of the Tricord Systems, Inc. 1998 Stock Incentive Plan (the "Plan")
is to advance the interests of Tricord Systems, Inc. (the "Company") and its
stockholders by enabling the Company and its Subsidiaries to attract and retain
persons of ability to perform services for the Company and its Subsidiaries 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 economic objectives.

2.     DEFINITIONS.

The following terms will 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.   "BROKER EXERCISE NOTICE" means a written notice pursuant to which
              a Participant, upon exercise of an Option, irrevocably instructs a
              broker or dealer to sell a sufficient number of shares or loan a
              sufficient amount of money to pay all or a portion of the exercise
              price of the Option and/or any related withholding tax obligations
              and remit such sums to the Company and directs the Company to
              deliver stock certificates to be issued upon such exercise
              directly to such broker or dealer.

       2.3.   "CHANGE IN CONTROL" means an event described in Section 13.1 of
              the Plan.

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

       2.5.   "COMMITTEE" means the group of individuals administering the Plan,
              as provided in Section 3 of the Plan.

       2.6.   "COMMON STOCK" means the common stock of the Company, no par
              value, 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 of the Plan.

       2.7.   "DISABILITY" means the disability of the Participant such as would
              entitle the Participant to receive disability income benefits
              pursuant to the long-term disability plan of the Company or
              Subsidiary then covering the Participant or, if no such plan
              exists or is applicable to the Participant, the permanent and
              total disability of the Participant within the meaning of Section
              22(e)(3) of the Code.

       2.8.   "ELIGIBLE RECIPIENTS" means all employees (including, without
              limitation, officers and directors who are also employees) of the
              Company or any Subsidiary and any non-employee consultants and
              independent contractors of the Company or any Subsidiary.

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

       2.10.  "FAIR MARKET VALUE" means, with respect to the Common Stock, as of
              any date (or, if no shares were traded or quoted on such date, as
              of the next preceding date on which there was such a trade or
              quote) (a) the closing sale price of the Common Stock if the
              Common Stock is listed, admitted to unlisted trading privileges or
              reported on any foreign or national securities exchange or on the
              Nasdaq National Market System or an equivalent foreign market on
              which sale prices are reported; (b) if the Common stock is not so
              listed, admitted to unlisted trading privileges or reported, the
              closing bid price reported by the Nasdaq SmallCap Market, OTC
              Bulletin Board or the National Quotation Bureau, Inc. or other
              comparable reporting service; or (c) if the Common Stock is not so
              listed or reported, such price as the Committee determines in good
              faith in the exercise of its reasonable discretion.

       2.11.  "INCENTIVE AWARD" means an Option, Stock Appreciation Right,
              Restricted Stock Award, Performance Unit or Stock Bonus granted to
              an Eligible Recipient pursuant to the Plan.

       2.12.  "INCENTIVE STOCK OPTION" means a right to purchase Common Stock
              granted to an Eligible Recipient pursuant to Section 6 of the Plan
              that qualifies as an "incentive stock option" within the meaning
              of Section 422 of the Code.

       2.13.  "NON-STATUTORY STOCK OPTION" means a right to purchase Common
              Stock granted to an Eligible Recipient pursuant to Section 6 of
              the Plan that does not qualify as an Incentive Stock Option.

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

       2.15.  "PARTICIPANT" means an Eligible Recipient who receives one or more
              Incentive Awards under the Plan.

       2.16.  "PERFORMANCE UNIT" means a right granted to an Eligible Recipient
              pursuant to Section 9 of the Plan to receive a payment from the
              Company, in the form of stock, cash or a combination of both, upon
              the achievement of established performance goals.

       2.17.  "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that are
              already owned by the Participant or, with respect to any Incentive
              Award, that are to be issued upon the grant, exercise or vesting
              of such Incentive Award.

       2.18.  "RESTRICTED STOCK AWARD" means an award of Common Stock granted to
              an Eligible Recipient pursuant to Section 8 of the Plan that is
              subject to the restrictions on transferability and the risk of
              forfeiture imposed by the provisions of such Section 8.

       2.19.  "RETIREMENT" means normal or approved early termination of
              employment or service pursuant to and in accordance with the
              regular retirement/pension plan or practice of the Company or
              Subsidiary then covering the Participant, provided that if the
              Participant is not covered by any such plan or practice, the
              Participant will be deemed to be covered by the Company's plan or
              practice for purposes of this determination.

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

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       2.21.  "STOCK APPRECIATION RIGHT" means a right granted to an Eligible
              Recipient pursuant to Section 7 of the Plan to receive a payment
              from the Company, in the form of stock, cash or a combination of
              both, equal to the difference between the Fair Market Value of one
              or more shares of Common Stock and the exercise price of such
              shares under the terms of such Stock Appreciation Right.

       2.22.  "STOCK BONUS" means an award of Common Stock granted to an
              Eligible Recipient pursuant to Section 10 of the Plan.

       2.23.  "SUBSIDIARY" means any entity that is directly or indirectly
              controlled by the Company or any entity in which the Company has a
              significant equity interest, as determined by the Committee.

       2.24.  "TAX DATE" means the date any withholding tax obligation arises
              under the Code for a Participant with respect to an Incentive
              Award.

3.     PLAN ADMINISTRATION.

       3.1.   THE COMMITTEE. The Plan will be administered by the Board or by a
              committee of the Board. So long as the Company has a class of its
              equity securities under section 12 of the Exchange Act, any
              committee administering the Plan will consist solely of two or
              more members of the Board who are "non-employee directors: within
              the meaning of Rule 16b-3 under the Exchange Act and, if the board
              so determines in its sole discretion, who are "outside directors
              within the meaning of section 162(m) of the Code. Such a
              committee, if established, will act by a majority approval of the
              members, and a majority of the members of such a committee will
              constitute a quorum. As used in this Plan, the term "Committee"
              will refer to the Board or to such a committee, if established. To
              the extent consistent with corporate law, the Committee may
              delegate to any officers of the Company the duties, power and
              authority of the Committee under the Plan pursuant to such
              conditions or limitations as the Committee may establish;
              provided, however, that only the Committee may exercise such
              duties, power and authority with respect to Eligible Recipients
              who are subject to Section 16 of the Exchange Act. The Committee
              may exercise its duties, power and authority under the Plan in its
              sole and absolute discretion without the consent of any
              Participant or other party, unless the Plan specifically provides
              otherwise. Each determination, interpretation or other action made
              or taken by the Committee pursuant to the provisions of the Plan
              will be conclusive and binding for all purposes and on all
              persons, and no member of the Committee will be liable for any
              action or determination made in good faith with respect to the
              Plan or any Incentive Award granted under the Plan.

       3.2.   AUTHORITY OF THE COMMITTEE.

              (a)    In accordance with and subject to the provisions of the
                     Plan, the Committee will have the authority to determine
                     all provisions of Incentive Awards as the Committee may
                     deem necessary or desirable and as consistent with the
                     terms of the Plan, including, without limitation, the
                     following: (i) the Eligible Recipients to be selected as
                     Participants; (ii) the nature and extent of the Incentive
                     Awards to be made to each Participant (including the number
                     of shares of Common Stock to be subject to each Incentive
                     Award, any exercise price, the manner in which

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                     Incentive Awards will vest or become exercisable and 
                     whether Incentive Awards will be granted in tandem with 
                     other Incentive Awards) and the form of written agreement, 
                     if any, evidencing such Incentive Award; (iii) the time or
                     times when Incentive Awards will be granted; (iv) the
                     duration of each Incentive Award; and (v) the restrictions
                     and other conditions to which the payment or vesting of
                     Incentive Awards may be subject. In addition, the Committee
                     will have the authority under the Plan to pay the economic
                     value of any Incentive Award in the form of cash, Common
                     Stock or any combination of both.

              (b)    The Committee will have the authority under the Plan to
                     amend or modify the terms of any outstanding Incentive
                     Award in any manner, including, without limitation, the
                     authority to modify the 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, accept the surrender of any outstanding
                     Incentive Award or, to the extent not previously exercised
                     or vested, authorize the grant of new Incentive Awards in
                     substitution for surrendered Incentive Awards; provided,
                     however that the amended or modified terms are permitted by
                     the Plan as then in effect and that any Participant
                     adversely affected by such amended or modified terms has
                     consented to such amendment or modification. No amendment
                     or modification to an Incentive Award, however, whether
                     pursuant to this Section 3.2 or any other provisions of the
                     Plan, will be deemed to be a regrant of such Incentive
                     Award for purposes of this Plan.

              (c)    In the event of (i) any reorganization, merger,
                     consolidation, recapitalization, liquidation,
                     reclassification, stock dividend, stock split, combination
                     of shares, rights offering, extraordinary dividend or
                     divestiture (including a spin-off) or any other change in
                     corporate structure or shares, (ii) any purchase,
                     acquisition, sale or disposition of a significant amount of
                     assets or a significant business, (iii) any change in
                     accounting principles or practices, or (iv) any other
                     similar change, in each case with respect to the Company or
                     any other entity whose performance is relevant to the grant
                     or vesting of an Incentive Award, the Committee (or, if the
                     Company is not the surviving corporation in any such
                     transaction, the board of directors of the surviving
                     corporation) may, without the consent of any affected
                     Participant, amend or modify the vesting criteria of any
                     outstanding Incentive Award that is based in whole or in
                     part on the financial performance of the Company (or any
                     Subsidiary or division thereof) or such other entity so as
                     equitably to reflect such event, with the desired result
                     that the criteria for evaluating such financial performance
                     of the Company or such other entity will be substantially
                     the same (in the discretion of the Committee or the board
                     of directors of the surviving corporation) following such
                     event as prior to such event; provided, however, that the
                     amended or modified terms are permitted by the Plan as then
                     in effect.

4.     SHARES AVAILABLE FOR ISSUANCE.

       4.1.   MAXIMUM NUMBER OF SHARES. Subject to adjustment as provided in
              Section 4.3 of the Plan, the maximum number of shares of Common
              Stock that will be available for issuance under the Plan will be
              5,000,000 shares, plus any shares of Common Stock which, as of 

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              the date the Plan is approved by the shareholders of the Company, 
              are reserved for issuance under the Company's 1995 Stock Incentive
              Plan and which are not thereafter issued or which have been issued
              but are subsequently forfeited and which would otherwise have been
              available for further issuance under the Plan. Notwithstanding any
              other provision of the Plan to the contrary, no Participant in the
              Plan may be granted, during the term of the Plan, any Options or
              Stock Appreciation Rights, or any other Incentive Awards with a
              value based solely on an increase in the value of the Common Stock
              after the date of grant, relating to more than 500,000 shares of
              Common Stock in the aggregate in any fiscal year of the Company
              (subject to adjustment as provided in Section 4.3 of the Plan).
              The shares available for issuance under the Plan may, at the
              election of the Committee, be either treasury shares or shares
              authorized but unissued, and, if treasury shares are used, all
              references in the Plan to the issuance of shares will, for
              corporate law purposes, be deemed to mean the transfer of shares
              from treasury.

       4.2.   ACCOUNTING FOR INCENTIVE AWARDS. Shares of Common Stock that are
              issued under the Plan or that are subject to outstanding Incentive
              Awards will be applied to reduce the maximum number of shares of
              Common Stock remaining available for issuance under the Plan. Any
              shares of Common Stock that are subject to an Incentive Award that
              lapses, expires, is forfeited or for any reason is terminated
              unexercised or unvested and any shares of Common Stock that are
              subject to an Incentive Award that is settled or paid in cash or
              any form other than shares of Common Stock will automatically
              again become available for issuance under the Plan. Any shares of
              Common Stock that constitute the forfeited portion of a Restricted
              Stock Award, however, will not become available for further
              issuance under the Plan.

       4.3.   ADJUSTMENTS TO SHARES AND INCENTIVE AWARDS. In the event of any
              reorganization, merger, consolidation, recapitalization,
              liquidation, reclassification, stock dividend, stock split,
              combination of shares, rights offering, divestiture or
              extraordinary dividend (including a spin-off) 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)
              will make appropriate adjustment (which determination will be
              conclusive) as to the number and kind of securities available for
              issuance under the Plan and, in order to prevent dilution or
              enlargement of the rights of Participants, the number, kind and,
              where applicable, exercise price of securities subject to
              outstanding Incentive Awards.

5.     PARTICIPATION.

Participants in the Plan will be those Eligible Recipients who, in the judgment
of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with other Incentive
Awards, as may be determined by the Committee. Incentive Awards will be deemed
to be granted as of the date specified in the grant resolution of the Committee,
which date will be the date of any related agreement with the Participant.

6.     OPTIONS.

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       6.1.   GRANT. An Eligible Recipient may be granted one or more Options
              under the Plan, and such Options will be subject to such terms and
              conditions, consistent with the other provisions of the Plan, as
              may be determined by the Committee. The Committee may designate
              whether an Option is to be considered an Incentive Stock Option or
              a Non-Statutory Stock Option.

       6.2.   EXERCISE PRICE. The per share price to be paid by a Participant
              upon exercise of an Option will be determined by the Committee in
              its discretion at the time of the Option grant, provided that (a)
              such price will not be less than 100% of the Fair Market Value of
              one share of Common Stock on the date of grant with respect to an
              Incentive Stock Option (110% of the Fair Market Value if, at the
              time the Incentive Stock Option is granted, the Participant owns,
              directly or indirectly, more than 10% of the total combined voting
              power of all classes of stock of the Company or any parent or
              subsidiary corporation of the Company), and (b) such price will
              not be less than 100% of the Fair Market Value of one share of
              Common Stock on the date of grant with respect to a Non-Statutory
              Stock Option.

       6.3.   EXERCISABILITY AND DURATION. An Option will become exercisable at
              such times and in such installments as may be determined by the
              Committee at the time of grant; provided, however, that no Option
              may be exercisable prior to six months from its date of grant and
              no Incentive Stock Option may be exercisable after 10 years from
              its date of grant (five years from its date of grant if, at the
              time the Incentive Stock Option is granted, the Participant owns,
              directly or indirectly, more than 10% of the total combined voting
              power of all classes of stock of the Company or any parent or
              subsidiary corporation of the Company).

       6.4.   PAYMENT OF EXERCISE PRICE. The total purchase price of the shares
              to be purchased upon exercise of an Option will be paid entirely
              in cash (including check, bank draft or money order); provided,
              however, that the Committee may allow such payments to be made, in
              whole or in part and upon such terms and conditions as may be
              established by the Committee, by tender of a Broker Exercise
              Notice, Previously Acquired Shares, a promissory note (on terms
              and conditions acceptable to the Committee) or by a combination of
              such methods.

       6.5.   MANNER OF EXERCISE. An Option may be exercised by a Participant in
              whole or in part from time to time, subject to the conditions
              contained in the Plan and in the agreement evidencing such Option,
              by delivery in person, by facsimile or electronic transmission or
              through the mail of written notice of exercise to the Company
              (Attention: Chief Financial Officer) at its principal executive
              office in Plymouth, Minnesota and by paying in full the total
              exercise price for the shares of Common Stock to be purchased in
              accordance with Section 6.4 of the Plan.

       6.6.   AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK OPTIONS.
              To the extent that 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 a Participant during any calendar year (under the
              Plan and any other incentive stock option plans of the Company or
              any subsidiary or parent corporation of the Company (within the
              meaning of the Code)) exceeds $100,000 (or such other amount as
              may be prescribed by the Code from time to time), such excess
              Options will be treated as Non-Statutory Stock

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              Options. The determination will be made by taking incentive stock 
              options into account in the order in which they were granted. If 
              such excess only applies to a portion of an incentive stock 
              option, the Committee will designate which shares will be treated 
              as shares to be acquired upon exercise of an incentive stock 
              option.

7.     STOCK APPRECIATION RIGHTS.

       7.1.   GRANT. An Eligible Recipient may be granted one or more Stock
              Appreciation Rights under the Plan, and such Stock Appreciation
              Rights shall be subject to such terms and conditions, consistent
              with the other provisions of the Plan, as will be determined by
              the Committee.

       7.2.   EXERCISE PRICE. The exercise price of a Stock Appreciation Right
              will be determined by the Committee at the date of grant but will
              not be less than 100% of the Fair Market Value of one share of
              Common Stock on the date of grant.

       7.3.   EXERCISABILITY AND DURATION. A Stock Appreciation Right will
              become exercisable at such time and in such installments as may be
              determined by the Committee at the time of grant; provided,
              however, that no Stock Appreciation Right may be exercisable prior
              to six months or after 10 years from its date of grant. A Stock
              Appreciation Right will be exercised by giving notice in the same
              manner as for Options, as set forth in Section 6.5 of the Plan.

8.     RESTRICTED STOCK AWARDS.

       8.1.   GRANT. An Eligible Recipient may be granted one or more Restricted
              Stock Awards under the Plan, and such Restricted Stock Awards will
              be subject to such terms and conditions, consistent with the other
              provisions of the Plan, as may be determined by the Committee. The
              Committee may impose such restrictions or conditions, not
              inconsistent with the provisions of the Plan, to the vesting of
              such Restricted Stock Awards as it deems appropriate, including,
              without limitation, that the Participant remain in the continuous
              employ or service of the Company or a Subsidiary for a certain
              period or that the Participant or the Company (or any Subsidiary
              or division thereof) satisfy certain performance goals or
              criteria; provided, however, that no Restricted Stock Award may
              vest prior to six months from its date of grant.

       8.2.   RIGHTS AS A STOCKHOLDER; TRANSFERABILITY. Except as provided in
              Sections 8.1, 8.3 and 14.3 of the Plan, a Participant will have
              all voting, dividend, liquidation and other rights with respect to
              shares of Common Stock issued to the Participant as a Restricted
              Stock Award under this Section 8 upon the Participant becoming the
              holder of record of such shares as if such Participant were a
              holder of record of shares of unrestricted Common Stock.

       8.3.   DIVIDENDS AND DISTRIBUTIONS. Unless the Committee determines
              otherwise (either in the agreement evidencing the Restricted Stock
              Award at the time of grant or at any time after the grant of the
              Restricted Stock Award), any dividends or distributions (including
              regular quarterly cash dividends) paid with respect to shares of
              Common Stock subject to the unvested portion of a Restricted Stock
              Award will be subject to the same restrictions as the shares to
              which such dividends or distributions relate. In the event the
              Committee determines not to pay such dividends or distributions
              currently, the Committee will

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              determine whether any interest will be paid on such dividends or
              distributions. In addition, the Committee may require such 
              dividends and distributions to be reinvested (and in such case the
              Participants consent to such reinvestment) in shares of Common 
              Stock that will be subject to the same restrictions as the shares
              to which such dividends or distributions relate.

       8.4.   ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions referred
              to in this Section 8, the Committee may place a legend on the
              stock certificates referring to such restrictions and may require
              the Participant, until the restrictions have lapsed, to keep the
              stock certificates, together with duly endorsed stock powers, in
              the custody of the Company or its transfer agent or to maintain
              evidence of stock ownership, together with duly endorsed stock
              powers, in a certificateless book-entry stock account with the
              Company's transfer agent.

9.     PERFORMANCE UNITS.

An Eligible Recipient may be granted one or more Performance Units under the
Plan, and such Performance Units will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee. The Committee may impose such restrictions or conditions, not
inconsistent with the provisions of the Plan, to the vesting of such Performance
Units as it deems appropriate, including, without limitation, that the
Participant remain in the continuous employ or service of the Company or any
Subsidiary for a certain period or that the Participant or the Company (or any
Subsidiary or division thereof) satisfy certain performance goals or criteria.
The Committee will have the discretion either to determine the form in which
payment of the economic value of vested Performance Units will be made to the
Participant (i.e., cash, Common Stock or any combination thereof) or to consent
to or disapprove the election by the Participant of the form of such payment.

10.    STOCK BONUSES.

An Eligible Recipient may be granted one or more Stock Bonuses under the Plan,
and such Stock Bonuses will be subject to such terms and conditions, consistent
with the other provisions of the Plan, as may be determined by the Committee.
The Participant will have all voting, dividend, liquidation and other rights
with respect to the shares of Common Stock issued to a Participant as a Stock
Bonus under this Section 10 upon the Participant becoming the holder of record
of such shares; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of a Stock Bonus as it deems
appropriate.

11.    EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE.

       11.1.  TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event a
              Participant's employment or other service with the Company and all
              Subsidiaries is terminated by reason of death, Disability or
              Retirement:

              (a)    All outstanding Options and Stock Appreciation Rights then
                     held by the Participant will remain exercisable to the
                     extent exercisable as of such termination for a period of
                     one year (three months in the case of termination by reason
                     of Retirement) after such termination (but in no event
                     after the expiration date of any such Option or Stock
                     Appreciation Right);

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              (b)    All outstanding Restricted Stock Awards then held by the
                     Participant that have not vested will become fully vested
                     and non-forfeitable; and

              (c)    All outstanding Performance Units and Stock Bonuses then
                     held by the Participant will vest and/or continue to vest
                     in the manner determined by the Committee and set forth in
                     the agreement evidencing such Performance Units or Stock
                     Bonuses.

11.2.  TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT.

       (a)    In the event a Participant's employment or other service is
              terminated with the Company and all Subsidiaries for any reason
              other than death, Disability or Retirement, or a Participant is in
              the employ or service of a Subsidiary and the Subsidiary ceases to
              be a Subsidiary of the Company (unless the Participant continues
              in the employ or service of the Company or another Subsidiary),
              all rights of the Participant under the Plan and any agreements
              evidencing an Incentive Award will immediately terminate without
              notice of any kind, and no Options or Stock Appreciation Rights
              then held by the Participant will thereafter be exercisable, all
              Restricted Stock Awards then held by the Participant that have not
              vested will be terminated and forfeited, and all Performance Units
              and Stock Bonuses then held by the Participant will vest and/or
              continue to vest in the manner determined by the Committee and set
              forth in the agreement evidencing such Performance Units or Stock
              Bonuses; provided, however, that if such termination is due to any
              reason other than voluntary termination by the Participant or
              termination by the Company or any Subsidiary for "cause," all
              outstanding Options and Stock Appreciation Rights then held by
              such Participant will remain exercisable to the extent exercisable
              as of such termination for a period of three months after such
              termination (but in no event after the expiration date of any such
              Option or Stock Appreciation Right).

       (b)    For purposes of this Section 11.2, "cause" (as determined by the
              Committee) will be as defined in any employment or other agreement
              or policy applicable to the Participant or, if no such agreement
              or policy exists, will mean (i) dishonesty, fraud,
              misrepresentation, embezzlement or deliberate injury or attempted
              injury, in each case related to the Company or any Subsidiary,
              (ii) any unlawful or criminal activity of a serious nature, (iii)
              any intentional and deliberate breach of a duty or duties that,
              individually or in the aggregate, are material in relation to the
              Participant's overall duties, or (iv) any material breach of any
              employment, service, confidentiality or non-compete agreement
              entered into with the Company or any Subsidiary.

       11.3.  MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the other
              provisions of this Section 11, upon a Participant's termination of
              employment or other service with the Company and all Subsidiaries,
              the Committee may in its discretion (which may be exercised at any
              time on or after the date of grant, including following such
              termination) cause Options and Stock Appreciation Rights (or any
              part thereof) then held by such Participant to become or continue
              to become exercisable and/or remain exercisable following such
              termination of employment or service and Restricted Stock Awards,
              Performance Units and Stock Bonuses then held by such Participant
              to vest and/or continue to vest or become free of transfer
              restrictions, as the case may be, following such

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              termination of employment or service, in each case in the manner 
              determined by the Committee; provided, however, that (a) no Option
              or Stock Appreciation may become exercisable, and no Restricted 
              Stock Award may vest and become non-forfeitable, prior to six 
              months from its date of grant, and (b) no Option or Stock 
              Appreciation Right may remain exercisable beyond its expiration 
              date.

       11.4.  BREACH OF CONFIDENTIALITY OR NON-COMPETE AGREEMENTS.
              Notwithstanding anything in this Plan to the contrary, in the
              event that a Participant materially breaches the terms of any
              confidentiality or non-compete agreement entered into with the
              Company or any Subsidiary, whether such breach occurs before or
              after termination of such Participant's employment or other
              service with the Company or any Subsidiary, the Committee may
              immediately terminate all rights of the Participant under the Plan
              and any agreements evidencing an Incentive Award then held by the
              Participant without notice of any kind.

       11.5.  DATE OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless the
              Committee otherwise determines, a Participant's employment or
              other service will, for purposes of the Plan, be deemed to have
              terminated on the date recorded on the personnel or other records
              of the Company or the Subsidiary for which the Participant
              provides employment or other service, as determined by the
              Committee based upon such records.

12.    PAYMENT OF WITHHOLDING TAXES.

       12.1.  GENERAL RULES. The Company is entitled to (a) withhold and deduct
              from future wages of the Participant (or from other amounts that
              may be due and owing to the Participant from the Company or a
              Subsidiary), or make other arrangements for the collection of, all
              legally required amounts necessary to satisfy any and all federal,
              state and local withholding and employment-related tax
              requirements attributable to an Incentive Award, including,
              without limitation, the grant, exercise or vesting of, or payment
              of dividends with respect to, an Incentive Award or a
              disqualifying disposition of stock received upon exercise of an
              Incentive Stock Option, or (b) require the Participant promptly to
              remit the amount of such withholding to the Company before taking
              any action, including issuing any shares of Common Stock, with
              respect to an Incentive Award.

       12.2.  SPECIAL RULES. The Committee may, upon terms and conditions
              established by the Committee, permit or require a Participant to
              satisfy, in whole or in part, any withholding or
              employment-related tax obligation described in Section 12.1 of the
              Plan by electing to tender Previously Acquired Shares, a Broker
              Exercise Notice or a promissory note (on terms acceptable to the
              Committee), or by a combination of such methods.

13.    CHANGE IN CONTROL.

       13.1.  CHANGE IN CONTROL. For purposes of this Section 13.1, a "Change in
              Control" of the Company will mean the following:

              (a)    the sale, lease, exchange or other transfer, directly or
                     indirectly, of substantially all of the assets of the
                     Company (in one transaction or in a series of related
                     transactions) to a person or entity that is not controlled
                     by the Company;

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              (b)    the approval by the stockholders of the Company of any plan
                     or proposal for the liquidation or dissolution of the
                     Company;

              (c)    a merger or consolidation to which the Company is a party
                     if the stockholders of the Company immediately prior to the
                     effective date of such merger or consolidation have
                     "beneficial ownership" (as defined in Rule 13d-3 under the
                     Exchange Act), immediately following the effective date of
                     such merger or consolidation, of securities of the
                     surviving corporation representing 70% or less of the
                     combined voting power of the surviving corporation's then
                     outstanding securities ordinarily having the right to vote
                     at elections of directors;

              (d)    any person becomes after the effective date of the Plan the
                     "beneficial owner" (as defined in Rule 13d-3 under the
                     Exchange Act), directly or indirectly, of 30% or more of
                     the combined voting power of the Company's outstanding
                     securities ordinarily having the right to vote at elections
                     of directors;

              (e)    the Incumbent Directors cease for any reason to constitute
                     at least a majority of the Board; or

              (f)    a change in control of the Company of a nature that would
                     be required to be reported pursuant to Section 13 or 15(d)
                     of the Exchange Act, whether or not the Company is then
                     subject to such reporting requirements.

       13.2.  INCUMBENT DIRECTORS. For purposes of this Section 13, "Incumbent
              Directors" of the Company means any individuals who are members of
              the Board on the effective date of the Plan and any individual who
              subsequently becomes a member of the Board whose election, or
              nomination for election by the Company's shareholders, was
              approved by a vote of at least a majority of the Incumbent
              Directors (either by specific vote or by approval of the Company's
              proxy statement in which such individual is named as a nominee for
              director without objection to such nomination).

       13.3.  ACCELERATION OF VESTING. Without limiting the authority of the
              Committee under Section 3.2 of the Plan, if a Change in Control of
              the Company occurs, then, unless otherwise provided in the
              agreement evidencing an Incentive Award, (a) all outstanding
              Options and Stock Appreciation Rights that have been held by a
              Participant for at least six months will become immediately
              exercisable in full and will remain exercisable for the remainder
              of their terms, regardless of whether the Participant to whom such
              Options or Stock Appreciation Rights have been granted remains in
              the employ or service of the Company or any Subsidiary; (b) all
              outstanding Restricted Stock Awards that have been held by the
              Participant for at least six months will become immediately fully
              vested and non-forfeitable; and (c) all outstanding Performance
              Units and Stock Bonuses then held by the Participant will vest
              and/or continue to vest in the manner determined by the Committee
              and set forth in the agreement evidencing such Performance Units
              or Stock Bonuses.

       13.4.  CASH PAYMENT FOR OPTIONS. If a Change in Control of the Company
              occurs, then the Committee, if approved by the Committee either in
              an agreement evidencing an Incentive Award at the time of grant or
              at any time after the grant of an Incentive Award, may determine
              that some or all Participants holding outstanding Options will
              receive, with respect to some or all of the shares of Common Stock
              subject to such Options, as of the

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              effective date of any such Change in Control of the Company, cash
              in an amount equal to the excess of the Fair Market Value of such
              shares immediately prior to the effective date of such Change in 
              Control of the Company over the exercise price per share of such 
              Options.

       13.5.  LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything
              in Section 13.3 or 13.4 of the Plan to the contrary, if, with
              respect to a Participant, the acceleration of the vesting of an
              Incentive Award as provided in Section 13.3 or the payment of cash
              in exchange for all or part of an Incentive Award as provided in
              Section 13.4 (which acceleration or payment could be deemed a
              "payment" within the meaning of Section 280G(b)(2) of the Code),
              together with any other payments which such Participant has the
              right to receive from the Company or any corporation that is a
              member of an "affiliated group" (as defined in Section 1504(a) of
              the Code without regard to Section 1504(b) of the Code) of which
              the Company is a member, would constitute a "parachute payment"
              (as defined in Section 280G(b)(2) of the Code), then the payments
              to such Participant pursuant to Section 13.3 or 13.4 will be
              reduced to the largest amount as will result in no portion of such
              payments being subject to the excise tax imposed by Section 4999
              of the Code; provided, however, that if such Participant is
              subject to a separate agreement with the Company or a Subsidiary
              that specifically provides that payments to such Participant will
              not be reduced even if such payments would constitute excess
              parachute payments or provides that the Participant will have the
              discretion to determine which payments will be reduced in order to
              avoid excess parachute payments (regardless of whether such
              separate agreement specifically references Incentive Awards under
              this Plan), then the limitations of this Section 13.5 will, to
              that extent, not apply.

14.    RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.

       14.1.  EMPLOYMENT OR SERVICE. Nothing in the Plan will interfere with or
              limit in any way the right of the Company or any Subsidiary to
              terminate the employment or service of any Eligible Recipient or
              Participant at any time, nor confer upon any Eligible Recipient or
              Participant any right to continue in the employ or service of the
              Company or any Subsidiary.

       14.2.  RIGHTS AS A STOCKHOLDER. As a holder of Incentive Awards (other
              than Restricted Stock Awards and Stock Bonuses), a Participant
              will have no rights as a stockholder unless and until such
              Incentive Awards are exercised for, or paid in the form of, shares
              of Common Stock and the Participant becomes the holder of record
              of such shares. Except as otherwise provided in the Plan, no
              adjustment will be made for dividends or distributions with
              respect to such Incentive Awards as to which there is a record
              date preceding the date the Participant becomes the holder of
              record of such shares, except as the Committee may determine.

       14.3.  RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will or
              the laws of descent and distribution or as otherwise expressly
              permitted by the Plan, no right or interest of any Participant in
              an Incentive Award prior to the exercise or vesting of such
              Incentive Award will be assignable or transferable, or subjected
              to any lien, during the lifetime of the Participant, either
              voluntarily or involuntarily, directly or indirectly, by operation
              of law or otherwise. A Participant will, however, be entitled to
              designate a beneficiary to receive an Incentive Award upon such
              Participant's death, and in the event of a Participant's death,

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<PAGE>

              payment of any amounts due under the Plan will be made to, and
              exercise of any Options or Stock Appreciation Rights (to the
              extent permitted pursuant to Section 11 of the Plan) may be made
              by, the Participant's legal representatives, heirs and legatees.

       14.4.  NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
              intended to modify or rescind any previously approved compensation
              plans or programs of the Company or create 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.

15.    SECURITIES LAW AND OTHER RESTRICTIONS.

Notwithstanding any other provision of the Plan or any agreements entered into
pursuant to the Plan, the Company will not be required to issue any shares of
Common Stock under this Plan, and a Participant may not sell, assign, transfer
or otherwise dispose of shares of Common Stock issued pursuant to Incentive
Awards granted under the Plan, unless (a) there is in effect with respect to
such shares a registration statement under the Securities Act and any applicable
state securities laws or an exemption from such registration under the
Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or advisable by
the Company in order to comply with such securities law or other restrictions.

16.    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 Awards under the Plan will 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
amendments to the Plan will be effective without approval of the stockholders of
the Company if stockholder approval of the amendment is then required pursuant
to Rule 16b-3 under the Exchange Act, Section 422 of the Code or the rules of
Nasdaq or any stock exchange. No termination, suspension or amendment of the
Plan may adversely affect any outstanding Incentive Award without the consent of
the affected Participant; provided, however, that this sentence will not impair
the right of the Committee to take whatever action it deems appropriate under
Sections 3.2(c) and 4.3 of the Plan.

17.    EFFECTIVE DATE AND DURATION OF THE PLAN.

The Plan is effective as of February 20, 1998, the date it was adopted by the
Board. The Plan will terminate at midnight on February 20, 2008, and may be
terminated prior to such time by Board action, and no Incentive Award will be
granted after such termination. Incentive Awards outstanding upon termination of
the Plan may continue to be exercised, or vest or become free of restrictions,
in accordance with their terms.

18.    MISCELLANEOUS.

       18.1.  GOVERNING LAW. The validity, construction, interpretation,
              administration and effect of the Plan and any rules, regulations
              and actions relating to the Plan will be governed by and construed
              exclusively in accordance with the laws of the State of Minnesota,
              without

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              regard to the conflicts of laws provisions of the State of 
              Minnesota or any other jurisdictions.

       18.2.  SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure to
              the benefit of the successors and permitted assigns of the Company
              and the Participants.

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