EXHIBIT
10.4


MEDICALCV, INC.

AMENDED AND RESTATED 2001 EQUITY INCENTIVE PLAN


(As Amended on April 20, 2007)


SECTION 1


DEFINED TERMS


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


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


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


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


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


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


(c)           the sale of all or
substantially all of the assets of the Company.


1.4           Code.  The term “Code” shall mean the Internal
Revenue Code of 1986, as amended.  A
reference to any provision of the Code shall include reference to any successor
provision of the Code.


1.5           Committee.  The term “Committee” shall mean a committee
described in Section 10.


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


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



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1.8           Covered Shares.  The term “Covered Shares” shall mean the
number of shares of Stock that a Participant may purchase pursuant to an
Option.


1.9           Director.  The term “Director” shall mean a member of
the Company’s Board.


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


1.11         Exchange Act.  The term “Exchange Act” shall mean the
Securities Act of 1934, as amended.


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


1.13         Fair Market Value.  The term “Fair Market Value” of a share of
Stock on a given date shall mean the closing price of the share of Stock as
reported on the Nasdaq Stock Market on such date, if the share of Stock is then
quoted on the Nasdaq Stock Market or, if the market is closed on that date, the
closing price of the share of Stock on the previous trading day.  If the Stock is not listed on the Nasdaq
Stock Market, Fair Market Value shall be determined in good faith by the Board
or Committee.


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


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


1.16         Non-Qualified Stock
Option.  The term “Non-Qualified
Stock Option” or “NSO” shall mean an Option that is not intended to satisfy the
requirements applicable to an “incentive stock Option” described in Section 422(b) of
the Code.  NSO grants may be awarded to
any Participant.


1.17         Option.  The term “Option” or “Stock Option” shall
mean an ISO or NSO granted pursuant to the Plan.  The grant of an Option entitles the
Participant to purchase shares of Stock at an Exercise Price established by the
Committee.


1.18         Participant.  The term “Participant” shall mean (a) any
common law employee, prospective employee, or officer of the Company, (b) employee
and non-employee members of the Company’s Board, (c) consultants and
advisors to the Company, and (d) employees of any Related Company or
business partner of the Company.  All
Participants must be natural persons who provide bona fide services to the
Company or a Related Company.  In
addition, the services provided to the Company or Related Company must not be
in connection with an offer or sale of securities in a capital raising transaction
and must not directly or indirectly promote or maintain a market for the
Company’s Stock.  An Award may be granted
to a Participant prior to the date the Participant performs services for the
Company or Related Company, provided that such Award shall not become vested
prior to the date the Participant first performs such services.


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


1.20         Plan.  The term “Plan” shall mean this Amended and
Restated 2001 Equity Incentive Plan.



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


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


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


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


SECTION 2


PURPOSE


The MedicalCV, Inc. 2001 Equity Incentive Plan has been
established by MedicalCV, Inc. to (i) attract and retain individuals
eligible to participate in the Plan; (ii) motivate Participants, by means
of appropriate incentives, to achieve long-range goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify Participants’ interests with
those of the Company’s other shareholders through compensation that is based on
the Company’s common stock; and thereby promote the long-term financial
interest of the Company and any Related Company, including the growth in value
of the Company’s equity and enhancement of long-term shareholder return.


SECTION 3


PARTICIPATION


Subject to the terms and conditions of the Plan, the Committee may
determine and designate, from time to time, Participants who will be granted
one or more Awards under the Plan.  In
its sole discretion and without shareholder approval, the Committee may grant
to a Participant any Award or Awards permitted under the provisions of the
Plan.  Awards may be granted as
alternatives to or replacement of Awards outstanding under the Plan, or any other
plan or arrangement of the Company or Related Company (including a plan or
arrangement of a business or entity, all or a portion of which is acquired by
the Company or a Related Company).  Only
employees are eligible to be granted Incentive Stock Options.


SECTION 4


STOCK OPTIONS


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



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4.2           Option
Awards.  Subject to the following
provisions, Options awarded under the Plan shall be in such form and shall have
such terms as the Committee may determine and specify in a Stock Option
Agreement entered into between the Participant and the Company.


(a)           Exercise of an Option.  An Option shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee.  In no event shall any
fraction of a share of Stock be issued upon the exercise of an Option.  An Option must be exercised for at least 100
shares of Stock, or such lesser number of shares of Stock if the remaining
portion of an Option is for fewer than 100 shares of Stock.


(b)           Exercise Price.  The Exercise Price of an Option granted under
this Section 4 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option is
granted, except that the Exercise Price shall not be less than 100% of the Fair
Market Value of the Company’s Stock on the date of grant.


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


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


(2)        Payment of the Exercise
Price shall be made in such manner as the Committee may provide in the Award,
which may include cash (including cash equivalents), tendering of shares of
Stock acceptable to the Committee and either already owned by the Participant
or subject to Awards hereunder, and any other manner permitted by law and
approved by the Committee, or any combination of the foregoing.  If the Company determines that a Stock Option
may be exercised using shares of Restricted Stock, then unless the Committee
provides otherwise, the shares received upon the exercise of a Stock Option
which are paid for using Restricted Stock shall be restricted in accordance
with the original terms of the Restricted Stock Award.  In the case of any deferred payment
arrangement, interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other
than amounts stated to be interest under the deferred payment arrangement.


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


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


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



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(g)           Termination of Employment.  Following the termination of Participant’s
employment with the Company or a Related Company, the Option shall be
exercisable to the extent determined by the Committee and specified in the
Award Agreement.  The Committee may
provide different post-termination exercise provisions with respect to
termination of employment for different reasons.


(h)           Incentive Stock Options.  ISO grants may only be awarded to employees
of the Company, a “parent corporation,” or a “subsidiary corporation” as those
terms are defined in Sections 424(e) and 424(f) of the Code.  In order for an employee to be eligible to
receive an ISO grant, the employee must be employed by the Company, parent
corporation, or subsidiary corporation during the period beginning on the date
the Option is granted and ending on the day three months prior to the date such
Option is exercised.  Notwithstanding the
provisions of Section 4.2, no ISO shall (i) have an Exercise Price
which is less than 100% of the Fair Market Value of the Stock on the date of
the ISO Award, (ii) be exercisable more than ten (10) years after the
ISO is awarded, or (iii) be awarded more than ten (10) years after
the Effective Date of this Plan.  No ISO
awarded to an employee who owns more than 10% of the total combined voting
power of all classes of Stock of the Company, its “parent corporation” or any “subsidiary
corporation” shall (i) have an Exercise Price of less than 110% of the
Fair Market Value of the Stock on the date of the ISO Award or (ii) be
exercisable more than five (5) years after the date of the ISO Award.  Notwithstanding Section 8.7, no ISO
shall be transferable other than by will and the laws of descent and
distribution.  To the extent that the
aggregate Fair Market Value (determined at the time of grant) of shares of
Stock with respect to ISOs are exercisable for the first time by the employee
during any calendar year, in combination with shares first exercisable under
all other plans of the Company and any Related Company, exceeds $100,000, such
Options shall be treated as NSOs.


(i)            Early Exercise.  The Option may, but need not, include a
provision whereby the Participant may elect at any time prior to his or her
termination of employment with the Company to exercise the Option as to any
part or all of the shares of Stock subject to the Option prior to the full
vesting of the Option.  Any unvested
shares of Stock so purchased may be subject to a repurchase Option in favor of
the Company or to any other restrictions the Committee determines to be
appropriate.


SECTION 5


PERFORMANCE AWARDS AND PERFORMANCE SHARES


5.1           Performance Awards.  The
Committee shall have the right to designate Awards of Options and Performance
Shares as “Performance Awards.”  The
grant or vesting of a Performance Award shall be subject to the achievement of
performance goals established by the Committee based on one or more of the
following criteria, in each case applied to the Company on a consolidated basis
or to a business unit, as specified by the Committee in an Award Agreement, and
which the Committee may use as an absolute measure, as a measure of improvement
relative to prior performance, or as a measure of comparable performance
relative to a peer group of companies: 
sales, operating profits, operating profits before interest expenses and
taxes, net earnings, earnings per share, return on equity, return on assets,
return on invested capital, total shareholder return, cash flow, debt to equity
ratio, market share, stock price, economic value added, and market value
added.  The terms and conditions of a
Performance Award shall be set forth in an Award Agreement entered into between
the Company and the Participant.



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5.2           Grant of Performance
Shares.  After selecting
Participants who will receive Awards of Performance of Shares for a given
performance period, the Committee shall inform each such Participant of the
Award to be granted to the Participant at the completion of the performance
period, and the applicable terms and condition of the Award.  The Committee shall cause to be issued to each
Participant a grant letter specifying the number of Performance Shares under
his Award and the number of Performance Shares which may be awarded subject to
the terms and conditions of such grant letter and Plan.


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


(b)           As promptly as
practical after each performance period, the Committee shall determine whether,
or the extent to which, the performance goals have been achieved.  Based on such determination, the Participant
shall be deemed to have earned the Performance Shares awarded to him, or a
percentage thereof as provided in any schedule established by the
Committee.  In addition, the Committee
may, from time to time during a performance period and consistent with the
terms and conditions of applicable Awards and performance goals, determine that
all or a portion of the Performance Shares awarded to one or more Participants
have been earned.  As soon as
administratively feasible following the satisfaction of the performance goals,
the Committee shall certify that the performance goals have been met.


(c)           If during the course
of a performance period, there should occur, in the opinion of the Committee,
significant changes in economic conditions or in the nature of the operations
of the Company, or any other pertinent changes which the Committee did not
foresee or accurately predict the extent of in establishing the performance
goals for such performance period and which, in the Committee’s sole judgment,
have, or are expected to have, a substantial effect on the performance of the
Company during the performance period, the Committee may make such adjustment
to the performance goals or measurements of such performance goals as the
Committee, in its sole judgment, may deem appropriate, but only as permitted
under Code Section 162(m) and regulations thereunder.


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



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SECTION 6


RESTRICTED STOCK


Subject to the following provisions, the Committee may grant Awards of
Restricted Stock to a Participant in such form and on such terms and conditions
as the Committee may determine and specify in a Restricted Stock Award
Agreement entered into between the Company and the Participant:


(a)        The Restricted Stock
Award shall specify the number of shares of Restricted Stock to be awarded, the
price, if any, to be paid by the Participant and the date or dates on which, or
the conditions upon the satisfaction of which, the Restricted Stock will
vest.  The grant and/or the vesting of
Restricted Stock may be conditioned upon the completion of a specified period
of service with the Company or a Related Company, upon the attainment of
specified performance objectives or upon such other criteria as the Committee
may determine.


(b)        Stock certificates
representing the Restricted Stock awarded to a Participant shall be registered
in the Participant’s name, but the Committee may direct that such certificates
be held by the Company or its designee on behalf of the Participant.  Except as may be permitted by the Committee,
no share of Restricted Stock may be sold, transferred, assigned, pledged or
otherwise encumbered by a Participant until such share has vested in accordance
with the terms of the Restricted Stock Award. 
At the time the Restricted Stock vests, a certificate for such vested
shares shall be delivered to the Participant (or his or her designated
beneficiary in the event of death), free from the restrictions imposed thereon
except that any restrictions under federal or state securities laws shall
continue to apply.


(c)        The Committee may
provide that the Participant shall have the right to vote or receive dividends
on Restricted Stock.  Unless the
Committee provides otherwise, Stock received as a dividend on, or in connection
with a stock split of, Restricted Stock shall be subject to the same
restrictions as the Restricted Stock.


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


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


SECTION 7


TAX OFFSET PAYMENTS


The Committee may provide for a Tax Offset Payment to be made by the
Company to a Participant with respect to one or more Awards granted under the
Plan.  The Tax Offset Payment shall be in
an amount specified by



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


SECTION 8


OPERATION AND ADMINISTRATION


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


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


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


(a)        Subject to adjustment
pursuant to the provisions of Section 8.3(c), the maximum aggregate number
of shares of Stock that may be issued under the Plan shall be 600,000 shares.  The shares of Stock may be authorized, but
unissued, or reacquired Stock.


(b)        To the extent an Award
terminates without having been exercised, or shares awarded are forfeited, such
shares shall again be available issue under the Plan.  Shares of Stock surrendered in payment of the
Exercise Price and shares of Stock which are withheld in order to satisfy
federal, state or local tax liability, shall not count against the maximum
aggregate number of shares authorized to be issued pursuant to this Plan, and
shall again be available for issuance pursuant to the terms of the Plan.


(c)        In the event that any
large, special and non-recurring dividend or other distribution (whether in the
form of cash or property other than Stock), recapitalization, forward or
reverse split, Stock dividend, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate, then the Committee
shall, in an equitable manner as determined by the Committee, adjust any or all
of (i) the number and kind of shares of Stock or other securities of the
Company or other issuer which are subject to the Plan, (ii) the number and
kind of shares of Stock or other securities of the Company or other issuer by
which annual per-person Award limitations are measured under Section 8.3(d),
(iii) the number and kind of shares of Stock or other securities of the
Company or other issuer subject to or deliverable in respect of outstanding
Awards and (iv) the Exercise Price, settlement price or purchase price
relating to any Award or, if deemed appropriate, the Committee may make
provision for a payment of cash or property to the holder of an outstanding
Option or other Award.  In addition, the
Committee is authorized to make adjustments in the terms



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


(d)        Subject to adjustment
as provided under Section 8.3(c), (i) the maximum number of shares of
Common Stock with respect to which stock Options may be granted during a calendar
year to any Participant under the Plan shall be 100,000 shares, and (ii) with
respect to Performance Shares and Restricted Stock intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the
Code, the maximum number of shares of common stock subject to such Awards
granted during a calendar year to any Participant under the Plan shall be the
equivalent of 10,000 shares.


8.4           Securities Laws
Restrictions.  Issuance of
shares of Stock or other amounts under the Plan shall be subject to the
following:


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


(b)        Any person exercising a
Stock Option or receiving Restricted Stock shall make such representations
(including representations to the effect that such person will not dispose of
the Stock so acquired in violation of federal and state securities laws) and
furnish such information as may, in the opinion of counsel for the Company, be
appropriate to permit the Company to issue the Stock in compliance with
applicable federal and state securities laws. 
The Committee may refuse to permit the exercise of a Stock Option or
issuance of Restricted Stock until such representations and information have
been provided.


(c)        The Company may place
an appropriate legend evidencing any transfer restrictions on all shares of
Stock issued under the Plan and may issue stop transfer instructions in respect
thereof.


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



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8.5           Tax Matters.


(a)        Withholding.  The Company and any subsidiary or affiliate
is authorized to withhold from any Award granted, any payment relating to an
Award under the Plan, including from a distribution of Stock, or any payroll or
other payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction or event involving an
Award, or to require a Participant to remit to the Company an amount in cash or
other property (including Stock) to satisfy such withholding before taking any
action with respect to an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award.  This authority
shall include authority to withhold or receive Stock or other property and to
make cash payments in respect thereof in satisfaction of a Participant’s
withholding obligations, either on a mandatory or elective basis in the
discretion of the Committee, or in satisfaction of other tax obligations.  The Company can delay the delivery to a
Participant of Stock under any Award to the extent necessary to allow the
Company to determine the amount of withholding to be collected and to collect
and process such withholding.


(b)        Required
Consent to and Notification of Code Section 83(b) Election.  No election under Section 83(b) of
the Code (to include in gross income in the year of transfer the amounts specified
in Code Section 83(b)) or under a similar provision of the laws of a
jurisdiction outside the United States may be made unless expressly permitted
by the terms of the Award document or by action of the Committee in writing
prior to the making of such election.  In
any case in which a Participant is permitted to make such an election in
connection with an Award, the Participant shall notify the Company of such
election within ten days of filing notice of the election with the Internal
Revenue Service or other governmental authority, in addition to any filing and
notification required pursuant to regulations issued under Code Section 83(b) or
other applicable provision.


(c)        Requirement
of Notification Upon Disqualifying Disposition Under Code Section 421(b).  If any Participant shall make any disposition
of shares of Stock delivered pursuant to the exercise of an ISO under the
circumstances described in Code Section 421(b) (i.e., a disqualifying
disposition), such Participant shall notify the Company of such disposition
within ten days thereof.


8.6           Payments.  Awards may be settled in any of the methods
described in Section 4.2(c).  Any
Award settlement, including payment deferrals, may be subject to such
conditions, restrictions and contingencies as the Committee shall
determine.  The Committee may permit or
require the deferral of any Award payment, subject to such rules and
procedures as it may establish, which may include provisions for the payment or
crediting of interest, or dividend equivalents, including converting such
credits into deferred Stock equivalents. 
Each Related Company shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are attributable
to the services rendered for that Related Company by the Participant.  Any disputes relating to liability of a
Related Company for cash payments shall be resolved by the Committee.


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



 10
 









8.8           Form and Time of
Elections.  Unless otherwise
specified herein, each election required or permitted to be made by any
Participant or other person entitled to benefits under the Plan, and any
permitted modification, or revocation thereof, shall be in writing filed with
the Committee at such times, in such form, and subject to such restrictions and
limitations, not inconsistent with the terms of the Plan, as the Committee
shall require.


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


8.10         Limitation of Implied
Rights.


(a)        Neither a Participant
nor any other person shall, by reason of participation in the Plan, acquire any
right in or title to any assets, funds or property of the Company or any
Related Company whatsoever, including, without limitation, any specific funds,
assets, or other property which the Company or any Related Company, in its sole
discretion, may set aside in anticipation of a liability under the Plan.  A Participant shall have only a contractual
right to the Stock or amounts, if any, payable under the Plan, unsecured by any
assets of the Company or any Related Company, and nothing contained in the Plan
shall constitute a guarantee that the assets of the Company or any Related
Company shall be sufficient to pay any benefits to any Participant.


(b)        This Plan does not
constitute a contract of employment, and selection as a Participant will not
give the Participant the right to be retained in the employ of the Company or
any Related Company, nor any right or claim to any future grants or to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.  Except as
otherwise provided in the Plan, no Award under the Plan shall confer upon a
Participant any rights of a shareholder of the Company prior to the date on
which the Participant fulfills all conditions for receipt of such rights.


8.11         Termination for Cause.  If the employment of a Participant is
terminated by the Company or a Related Company for “cause,” then the Committee
shall have the right to cancel any Awards granted to the Participant under the
Plan.  “Cause” shall be an event
constituting cause under any written employment agreement between the
Participant and the Company, or in absence of such an agreement, the term “cause”
shall mean (1) the Participant’s violation of any provision of any
non-competition agreement or confidentiality agreement with the Company; (2) an
illegal or negligent action by the Participant that materially and adversely
affects the Company; (3) the Participant’s failure or refusal to perform
his/her duties (except when prevented by reason of illness or disability); or (4) conviction
of the Participant of a felony involving moral turpitude.


8.12         Evidence.  Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information which the
person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.


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



 11
 









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


(b)        The Participant will be
obligated to repay to the Company, in cash, within five business days after
demand is made therefor by the Company, the total amount of Award Gain (as
defined herein) realized by the Participant upon each exercise of an Option or
settlement of an Award that occurred on or after (A) the date that is six
months prior to the occurrence of the Forfeiture Event, if the Forfeiture Event
occurred while the Participant was employed by the Company or a subsidiary or
affiliate, or (B) the date that is six months prior to the date the
Participant’s employment by the Company or a subsidiary or affiliate
terminated, if the Forfeiture Event occurred after the Participant ceased to be
so employed.  For purposes of this
Section, the term “Award Gain” shall mean (i), in respect of a given Option
exercise, the product of (X) the Fair Market Value per share of Stock at the
date of such exercise (without regard to any subsequent change in the market
price of shares) minus the Exercise Price times (Y) the number of shares as to
which the Option was exercised at that date, and (ii), in respect of any other
settlement of an Award granted to the Participant, the Fair Market Value of the
cash or Stock paid or payable to Participant (regardless of any elective
deferral) less any cash or the Fair Market Value of any Stock or property
(other than an Award or Award which would have itself then been forfeitable
hereunder and excluding any payment of tax withholding) paid by the Participant
to the Company as a condition of or in connection such settlement.


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


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


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


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



 12
 









any applicable law or regulation or result in
actual liability under Section 16(b) for the Participant whose Award
is modified.


8.17         It is the intent of the Company that Options Performance
Shares granted to Covered Employees and other Awards designated as Performance
Awards to Covered Employees subject to Section 5 shall constitute
qualified “performance-based compensation” within the meaning of Code Section 162(m)
and regulations thereunder, unless otherwise determined by the Committee at the
time of allocation of an Award. 
Accordingly, the terms of Section 5, including the definitions of
Covered Employee and other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder.  The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet been completed,
the term Covered Employee as used herein shall mean only a person designated by
the Committee as likely to be a Covered Employee with respect to a specified
fiscal year.  If any provision of the
Plan or any Award document relating to an Award that is designated as intended
to comply with Code Section 162(m) does not comply or is inconsistent with
the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer upon
the Committee or any other person discretion to increase the amount of
compensation otherwise payable in connection with any such Award upon
attainment of the applicable performance objectives.


8.18         No Repricing Without
Shareholder Approval.  Except
as provided in Section 8.3(c) hereof relating to certain
anti-dilution adjustments, unless the approval of shareholders of the Company
is obtained, Awards of Options shall not be amended to lower their Exercise
Prices, and such Awards may not be exchanged for other Options with lower
Exercise Prices.


SECTION 9


CHANGE IN CONTROL


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


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


(b)        in the case of
Restricted Stock, the Award shall become fully vested and shall be settled in
full.  The Committee may also, through
the terms of an Award or otherwise, provide for an absolute or conditional
exercise, payment or lapse of conditions or restrictions on an



 13
 









Award
which shall only be effective if, upon the announcement of a transaction
intended to result in a Change in Control, no provision is made in such
transaction for the assumption and continuation of outstanding Awards.


9.2           Effect of Change in
Control Upon Performance-based Awards.  Unless the Committee specifies otherwise in
the terms of an Award prior to a Change in Control, this Section 9.2 shall
control the treatment of any Restricted Stock if at the time of the Change in
Control the grant, issuance, retention, vesting and/or settlement of such Award
is based in whole or in part on performance criteria and level of achievement
versus such criteria.  In the case of an
Award subject to this Section 9.2 in which fifty percent (50%) or more of
the performance period applicable to the Award has elapsed as of the date of
the Change in Control, the Participant shall be entitled to payment, vesting or
settlement of such Award based upon performance through a date occurring within
three months prior to the date of the Change in Control, as determined by the
Committee prior to the Change in Control, and pro-rated based upon the
percentage of the performance period that has elapsed between the date such
Award was granted and the date of the Change in Control.  In the case of an Award subject to this Section 9.2
in which less than fifty percent (50%) of the performance period applicable to
the Award has elapsed as of the date of the Change in Control, the Participant
shall be entitled to payment, vesting or settlement of the target amount of
such Award, as determined by the Committee prior to the Change in Control,
pro-rated based upon the percentage of the performance period that has elapsed
between the date such Award was granted and the date of the Change in
Control.  The Committee may determine
either in advance or at the time of the Change in Control the treatment of the
pro-rata portion of an Award attributable to the portion of the performance
period occurring after the date of the Change in Control.


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


SECTION 10


COMMITTEE


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



 14
 









10.2         Powers of Committee.  The Committee shall have the
following authority with respect to Awards under the Plan:  to grant Awards; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall deem advisable; to interpret the terms and provisions of the Plan and any
Award granted under the Plan; and to otherwise supervise the administration of
the Plan.  In particular, and without
limiting its authority and powers, the Committee shall have the authority:


(a)        to determine whether
and to what extent any Award or combination of Awards will be granted
hereunder;


(b)        to select the
Participants to whom Awards will be granted;


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


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


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


(f)         to determine that
amounts equal to the amount of any dividends declared with respect to the
number of shares covered by an Award (i) will be paid to the Participant
currently or (ii) will be deferred and deemed to be reinvested or (iii) will
otherwise be credited to the Participant or that the Participant has no rights
with respect to such dividends;


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


(h)        to substitute new Stock
Options for previously granted Stock Options, or for Options granted under
other plans or agreements, in each case including previously granted Options
having higher Option prices.


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


10.3         Delegation by Committee.  Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities
and powers to any person or persons selected by it.  Any such allocation or delegation may be
revoked by the Committee at any time.


10.4         Information to be
Furnished to Committee.  The
Company and any Related Company shall furnish the Committee with such data and
information as it determines may be required for it to discharge its
duties.  The records of the Company and
any Related Company as to a Participant’s employment, termination of
employment, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be



 15
 









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


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


SECTION 11


AMENDMENT AND TERMINATION


The Board may, at any time, amend or terminate the Plan, provided that
no amendment or termination may, in the absence of written consent to the
change by the affected Participant (or, if the Participant is not then living,
the affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments made pursuant to
Subsection 8.3(c) shall not be subject to the foregoing limitations
of this Section 11.  An amendment
shall be subject to approval by the Company’s shareholders only to the extent
required by applicable laws, regulations or rules of a stock exchange or
similar entity.


SECTION 12


GENERAL PROVISIONS


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


12.2         No Limit on Other
Compensation Arrangements. 
Nothing contained in the Plan shall prevent the Company or any Related
Company from adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.


12.3         Headings.  The headings of the sections and subsections
of this Plan are intended for the convenience of the parties only and shall in
no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof.


12.4         Beneficiaries.  A Participant may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan may be paid or transferred in
case of death.  Each designation will
revoke all prior designations, shall be in a form prescribed by the Committee,
and will be effective only when filed by the Participant in writing with the
Committee during his or her lifetime.  In
the absence of any such designation, benefits outstanding at the Participant’s
death shall be paid or transferred to his or her estate.  There shall be no third party beneficiaries
of or to this Plan.  Any beneficiary of
the Participant shall have only a claim to such benefits as may be determined
to be payable hereunder, if any, and shall not, under any circumstances other
than the right to claim such benefits, be deemed a third party beneficiary of
or to this Plan.


12.5         Repurchase Option.  The terms of any repurchase Option shall be
specified in the Award Agreement.



 16
 









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


12.7         Severability; Entire
Agreement.  If any of the
provisions of the Plan or any Award document is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability, and the remaining provisions shall not be
affected thereby; provided, that, if any of such provisions is finally held to
be invalid, illegal, or unenforceable because it exceeds the maximum scope
determined to be acceptable to permit such provision to be enforceable, such
provision shall be deemed to be modified to the minimum extent necessary to
modify such scope in order to make such provision enforceable hereunder.  The Plan and any agreements or documents
designated by the Committee as setting forth the terms of an Award contain the
entire agreement of the parties with respect to the subject matter thereof and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter thereof.


12.8         Plan Effective Date and
Termination.  The Plan, as
amended and restated, shall become effective if, and at such time as, the
stockholders of the Company have approved it in accordance with applicable law
and stock exchange requirements.  Unless
earlier terminated by action of the Board of Directors, the authority of the
Committee to make grants under the Plan shall terminate on June 28, 2011,
and the Plan will remain in effect until such time as no Stock remains
available for delivery under the Plan or as set forth above and the Company has
no further rights or obligations under the Plan with respect to outstanding
Awards under the Plan.



 17