<PAGE>


                                      HEI, INC.
                         1989 OMNIBUS STOCK COMPENSATION PLAN
               AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 15, 1991 AND
         AMENDED EFFECTIVE APRIL 29, 1992, MAY 11, 1994, AND OCTOBER 31, 1996

                                  TABLE OF CONTENTS

ITEM           DESCRIPTION                                                 PAGE
----           -----------                                                 ----

SECTION 1.    Purpose; Definitions . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.    Administration . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.    Stock Subject to Plan. . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.    Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.    Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.    Stock Appreciation Rights. . . . . . . . . . . . . . . . . . .10
SECTION 7.    Restricted Stock . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 8.    Deferred Stock . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 9.    Stock Purchase Rights. . . . . . . . . . . . . . . . . . . . .14
SECTION 10.   Other Stock-Based Awards . . . . . . . . . . . . . . . . . . .17
SECTION 11    Change in Control Provisions . . . . . . . . . . . . . . . . .18
SECTION 12.   Amendments and Termination . . . . . . . . . . . . . . . . . .19
SECTION 13.   Unfunded Status of Plan. . . . . . . . . . . . . . . . . . . .20
SECTION 14.   General Provisions . . . . . . . . . . . . . . . . . . . . . .21
SECTION 15.   Effective Date of Plan . . . . . . . . . . . . . . . . . . . .22
SECTION 16.   Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 17.   Applicability to Grants under Other Company Plans. . . . . . .23


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                                      HEI, INC.
                         1989 OMNIBUS STOCK COMPENSATION PLAN
                 AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 15, 1991
   AND AMENDED EFFECTIVE APRIL 29, 1992 AND MAY 11, 1994, AND OCTOBER 31, 1996

SECTION 1.    PURPOSE; DEFINITIONS

    The purpose of the HEI, Inc. 1989 Omnibus Stock Compensation Plan (the
"Plan") is to enable HEI, Inc. (the "Company") to attract, retain, and reward
employees of the Company and its Parents, Subsidiaries, and Affiliates, and
strengthen the mutuality of interests between such employees and the Company's
shareholders, by offering such employees performance-based stock incentives
and/or other equity interests or equity-based incentives of the Company.

    In addition to definitions that may be contained elsewhere in this Plan,
for purposes of the Plan, the following terms shall be defined as set forth
below:

         (a)  "Affiliate" means any entity other than the Company and its
    Parents and Subsidiaries that is designated by the Board as a participating
    employer under the Plan, provided that the Company directly or indirectly
    owns at least 20% of the combined voting power of all classes of stock of
    such entity or at least 20% of the ownership interests in such entity.

         (b)  "Award" means any Option, Stock Appreciation Right, Restricted
    Stock Award, Deferred Stock Award, Stock Purchase Right, or Other
    Stock-Based Award, or any other right, interest, or option relating to
    Stock or other securities of the Company granted pursuant to the provisions
    of this Plan.

         (c)  "Award Agreement" means any written agreement, contract, or other
    instrument or document evidencing any Award granted by the Committee
    hereunder and signed by both the Company and the Participant.

         (d)  "Board" means the Board of Directors of the Company.

         (e)  "Code" means the Internal Revenue Code of 1986, as amended from
    time to time, and any successor thereto.

         (f)  "Committee" means the Committee referred to in Section 2 of the
    Plan.  If at any time no Committee shall be in office, then the functions
    of the Committee specified in the Plan shall be exercised by the Board.
    Where the Board has retained administrative authority with respect to the
    Plan, references herein to the "Committee" shall refer to the Board.

         (g)  "Company" means HEI, Inc., a corporation organized under the laws
    of the State of Minnesota, or any successor corporation.


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         (h)  "Deferred Stock" means an Award made pursuant to Section 8 below
    of the right to receive Stock at the end of a specified deferral period.

         (i)  "Disability" means disability as determined under procedures
    established by the Committee for purposes of this Plan or, as applied to
    Incentive Stock Options, as defined in Section 22(e)(3) of the Code.

         (j)  [deleted]

         (k)  "Exchange Act" means the Securities Exchange Act of 1934, as
    amended from time to time.

         (1)  "Fair Market Value" means as of any given date, unless otherwise
    determined by the Committee in good faith, the average for the preceding
    five business days of the closing bid prices of the Stock as reported on
    the National Association of Securities Dealers, Inc.  Automated Quotations
    System ("NASDAQ") or, if the Stock is then traded on the NASDAQ National
    Market System ("NASDAQ/NMS") or a national or regional securities exchange,
    the average for the preceding five business days of the closing prices of
    the Stock on NASDAQ/NMS or such exchange.

         (m)  "Incentive Stock Option" means any Stock Option intended to be
    and designated as an "Incentive Stock Option" within the meaning of Section
    422 of the Code.

         (n)  "Nonqualified Stock Option" means any Stock Option that is not an
    Incentive Stock Option.

         (o)  "Other Stock-Based Award" means an Award under Section 10 below
    that is valued in whole or in part by reference to, or is otherwise based
    on, Stock.

         (p)  "Parent" means any corporation (other than the Company) in an
    unbroken chain of corporations ending with the Company if, at the time of
    the granting of an Award, each of the corporations other than the Company
    owns stock possessing 50% or more of the total combined voting power of all
    classes of stock in one of the other corporations in the chain.

         (q)  "Participant" means an employee of the Company or any Subsidiary,
    Parent, or Affiliate of the Company who is selected by the Committee to
    receive an Award under the Plan.

         (r)  "Plan" means this HEI, Inc. 1989 Omnibus Stock Compensation Plan,
    as hereafter amended from time to time.

         (s)  "Restricted Stock" means an Award made pursuant to Section 7
    below of Stock that is subject to restrictions.


                                          3

<PAGE>

         (t)  "Stock" means the Common Stock, $.05 par value per share, of the
    Company.

         (u)  "Stock Appreciation Right" or "SAR" means the right to receive to
    receive a payment in cash, Stock, Restricted Stock, or Deferred Stock as
    determined by the Committee.

         (v)  "Stock Option" or "Option" means any option to purchase shares of
    Stock (including Restricted Stock and Deferred Stock, if the Committee so
    determines) granted pursuant to Section 5 below.

         (w)  "Stock Purchase Right" means the right to purchase Stock pursuant
    to Section 9 below.

         (x)  "Subsidiary" means any corporation (other than the Company) in an
    unbroken chain of corporations beginning with the Company if, at the time
    of the granting of an Award, each of the corporations other than the last
    corporation in the unbroken chain owns stock possessing 50% or more of the
    total combined voting power of all classes of stock in one of the other
    corporations in the chain.

    In addition, the terms "Change in Control" and "Change in Control Price"
shall have the meanings set forth, respectively, in Sections 11(b) and (c)
below.

SECTION 2.    ADMINISTRATION

    The Plan shall be administered by a Committee of not fewer than two members
of the Board, who shall be appointed by the Board and serve at the pleasure of
the Board.  Initially, the Committee shall consist of the three nonemployee
directors.  The functions of the Committee specified in the Plan shall be
exercised by the Board, if and to the extent that no Committee exists that has
the authority to so administer the Plan, or to the extent that the Board retains
authority to administer the Plan under specified circumstances.  As to the
selection of and grants of Awards to persons who are not subject to Sections
16(a) and 16(b) of the Exchange Act, the Committee may delegate any or all of
its responsibility to members of the Company's administration.  The grants of
Awards and determination of the terms thereof to persons who are subject to
Sections 16(a) and 16(b) of the Exchange Act shall be made in a manner that
satisfies the requirements of Rule 16b-3 under the Exchange Act, or any
successor rule.

    The Committee shall have full power and authority, consistent with the
provisions of the Plan and subject to such orders or resolutions not
inconsistent with the provisions of the Plan as may be adopted by the Board:

         (a)  to select the employees of the Company and any Parent,
    Subsidiary, or Affiliate to whom Awards may from time to time be granted
    hereunder;

         (b)  to determine the type or types of Awards to be granted to
    employees hereunder;



                                          4

<PAGE>


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

         (d)  to determine the terms and conditions, not inconsistent with the
    terms of the Plan, of any Award granted hereunder;

         (e)  to determine whether, to what extent, and under what
    circumstances an Award may be settled in cash, Stock, or other property or
    canceled or suspended;

         (f)  to determine whether, to what extent, and under what
    circumstances cash, Stock, and other property and other amounts payable
    with respect to an Award shall be deferred either automatically or at the
    election of the Participant;

         (g)  to interpret and administer the Plan and any instrument or
    agreement entered into thereunder;

         (h)  to establish such rules and regulations and appoint such agents
    as it shall deem appropriate for proper administration of the Plan; and

         (i)  to make any other determination and take any other action that
    the Committee deems necessary or desirable for administration of the Plan.

    Members of the Board and of the Committee acting under the Plan shall be
fully protected in relying in good faith upon the advice of counsel and shall
incur no liability except for gross negligence or willful misconduct in the
performance of their duties.

    Decisions of the Committee shall be made in the Committee's sole discretion
and shall be final, conclusive, and binding on all persons, including the
Company, any Participant, any shareholder, and any employee of the Company or
any Parent, Subsidiary, or Affiliate.

SECTION 3.    STOCK SUBJECT TO PLAN

    The total number of shares of Stock reserved and available for distribution
under the Plan shall be 1,200,000 shares of Stock.  Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.

    Subject to the possible adjustments described in the last paragraph of this
Section 3, the total number of shares of Stock reserved and authorized for
issuance upon exercise of Incentive Stock Options shall be 900,000.  To the
extent that such shares are not used for Incentive Stock Options, they shall be
available for other Awards to be granted under the Plan.

    If any shares of Stock subject to an Award are not issued to a Participant
because an Option or SAR is not exercised or an Award is otherwise forfeited or
any such Award otherwise terminates without a payment being made to the
Participant in the form of Stock, such shares shall again be available for
distribution in connection with future Awards under the Plan.


                                          5

<PAGE>

    In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, Stock split, or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Options granted under
the Plan, in the number and purchase price of shares subject to outstanding
Stock Purchase Rights under the Plan, and in the number of shares subject to
other outstanding Awards granted under the Plan as may be determined to be
appropriate by the Board, in its sole discretion, provided that the number of
shares subject to any Award shall always be a whole number.  Any such adjusted
option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right associated with any Stock
Option.

SECTION 4.    ELIGIBILITY

    Except as otherwise provided herein with respect to a specific Award under
Section 9, officers, management, or highly compensated employees of the Company
and any Subsidiary, Parent, or Affiliate (but excluding members of the
Committee) are eligible to be granted Awards under the Plan.  The Committee
shall have the exclusive authority to determine what constitutes management or a
"highly compensated employee" and in making such a determination shall take into
consideration guidelines established by the Department of Labor and court
decisions as to what constitutes a "select group of management or highly
compensated employees."

SECTION 5.    STOCK OPTIONS

    Stock options may be granted alone, in addition to or in tandem with other
Awards granted under the Plan.  Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.

    Stock Options granted under the Plan may be of two types:  (i) Incentive
Stock Options and (ii) Nonqualified Stock Options.  Options may be issued with
or without Stock Appreciation Rights.

    Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

         (a)  EXERCISE PRICE.  Except as provided in Section 5(i), the exercise
    price per share of Stock purchasable under a Stock Option shall be
    determined by the Committee at the time of grant but shall be not less than
    85% of the Fair Market Value of the Stock on the date of grant.

         (b)  OPTION TERM.  Except as provided in Section 5(i) hereof, the term
    of each Stock Option shall be fixed by the Committee.

         (c)  EXERCISABILITY.  Stock Options shall be exercisable at such time
    or times and subject to such terms and conditions as shall be determined by
    the Committee at or after grant; provided, however, that, except as
    provided in Sections 5(f), (g), and (h) and


                                          6

<PAGE>

    Section 11, unless otherwise determined by the Committee at or after grant,
    no Stock Option shall be exercisable prior to the first anniversary date of
    the granting of the Option.  If the Committee provides, in its sole
    discretion, that any Stock Option is exercisable only in installments, the
    Committee may waive such installment exercise provisions at any time at or
    after grant in whole or in part, based on such factors as the Committee
    shall determine, in its sole discretion.

         (d)  METHOD OF EXERCISE.  Subject to whatever installment exercise
    provisions apply under Section 5(c), Stock Options may be exercised in
    whole or in part at any time during the option period.

         Payment of the exercise price may be made by check, note (if approved
    by the Board), or such other instrument or method as the Committee may
    accept.  If so provided in the related Award Agreement, payment in full or
    in part may also be made in the form of Stock already owned by the optionee
    or Restricted Stock or Deferred Stock subject to an Award hereunder (based,
    in each case, on the Fair Market Value of the Stock on the date the Option
    is exercised, as determined by the Committee).  Payment of the exercise
    price may be made through exercise of either Tandem SARS or Freestanding
    SARS held by the optionee.  With the prior approval of the Committee, the
    exercise price of an Option may be paid through the delivery of Stock
    acquired by successive exercises of the Option ("pyramiding").

         If payment of the exercise price of a Stock Option is made in whole or
    in part in the form of Restricted Stock or Deferred Stock, such Restricted
    Stock or Deferred Stock (and any replacement shares relating thereto) shall
    remain (or be) restricted or deferred, as the case may be, in accordance
    with the original terms of the Restricted Stock Award or Deferred Stock
    Award in question, and any additional Stock received upon the exercise
    shall be subject to the same forfeiture restrictions or deferral
    limitations, unless otherwise determined by the Committee, in its sole
    discretion, at or after grant.

         No shares of Stock shall be issued until full payment therefor has
    been made.  An optionee shall generally have the rights to dividends or
    other rights of a shareholder with respect to shares subject to the Option
    after the optionee has given written notice of exercise, has paid in full
    for such Stock, and, if requested, has given the representation described
    in Section 14(a).

         (e)  NONTRANSFERABILITY OF OPTIONS.  Subject to Section 5(i), and
    unless otherwise provided by the related Award Agreement, no Stock Option
    shall be transferable by the optionee otherwise than by the laws of descent
    and distribution or pursuant to a qualified domestic relations order as
    defined by the Code or Title I of the Employee Retirement Income Security
    Act, or the rules thereunder, and all Stock Options shall be exercisable
    during the optionee's lifetime only by the optionee.

         (f)  TERMINATION BY DEATH.  Subject to Section 5(i), if an optionee's
    employment by the Company or any Subsidiary, Parent, or Affiliate
    terminates by reason of death, any Stock Option held by such optionee may
    thereafter be exercised, to the


                                          7

<PAGE>

    extent such option was exercisable at the time of death or on such
    accelerated basis as the Committee may determine at or after grant (or as
    may be determined in accordance with procedures established by the
    Committee), by the legal representative of the optionee's estate or by any
    person who acquired the Option by will or the laws of descent and
    distribution, for a period of one year (or such other period as the
    Committee may specify at grant) from the date of such death or until the
    expiration of the stated term of such Stock Option, whichever period is the
    shorter.

         (g)  TERMINATION BY REASON OF DISABILITY.  Subject to Section 5(i), if
    an optionee's employment by the Company or any Subsidiary, Parent, or
    Affiliate terminates by reason of Disability, any Stock Option held by such
    optionee may thereafter be exercised by the optionee, to the extent it was
    exercisable at the time of termination or on such accelerated basis as the
    Committee may determine at or after grant (or as may be determined in
    accordance with procedures established by the Committee), until the
    expiration of the stated term of such Stock Option (unless otherwise
    specified by the Committee at the time of grant); provided, however, that,
    if the optionee dies prior to such expiration (or within such other period
    as the Committee shall specify at grant), any unexercised Stock Option held
    by such optionee shall thereafter be exercisable to the extent to which it
    was exercisable at the time of death for a period of one year from the date
    of such death or until the expiration of the stated term of such Stock
    Option, whichever period is the shorter.

         (h)  OTHER TERMINATION.  Subject to Section 5(i), unless otherwise
    determined by the Committee (or pursuant to procedures established by the
    Committee) at or after grant, if an optionee's employment by the Company or
    any Subsidiary, Parent, or Affiliate terminates for any reason other than
    death or Disability, the Stock Option shall be exercisable, to the extent
    otherwise then exercisable, for the lesser of three months from the date of
    termination of employment or the balance of such Stock Option's term.

         (i)  INCENTIVE STOCK OPTIONS.  Anything in the Plan to the contrary
    not withstanding, no term of this Plan relating to Incentive Stock Options
    shall be interpreted, amended, or altered, nor shall any discretion or
    authority granted under the Plan be so exercised, so as to disqualify the
    Plan under Section 422 of the Code or, without the consent of the
    optionee(s) affected, to disqualify any Incentive Stock Option under such
    Section 422.

         To the extent required for "incentive stock option" status under
    Section 422 of the Code (taking into account applicable Internal Revenue
    Service regulations and pronouncements and court decisions), the Plan shall
    be deemed to provide:

              (i)  that Incentive Stock Options may be granted only to
         employees of the Company or any Parent or Subsidiary of the Company;

              (ii) that the exercise price of any Incentive Stock Option shall
         not be less than 100% of the Fair Market Value of the Stock as of the
         date of grant


                                          8

<PAGE>

         (110% for an optionee who owns stock possessing more than 10% of the
         voting power of all classes of stock of the Company or of a Parent or
         Subsidiary);

              (iii)     that the maximum term of exercise for any Incentive
         Stock Option shall not exceed ten years (five years in the case of an
         optionee who owns stock possessing more than 10% of the voting power
         of all classes of stock of the Company or of a Parent or Subsidiary);
         and

              (iv) that Incentive Stock Options shall not be transferable by
         the optionee otherwise than by will or the laws of descent and
         distribution and shall be exercisable, during the optionee's lifetime,
         only by the optionee.

         To the extent permitted under Section 422 of the Code or applicable
    regulations thereunder or any applicable Internal Revenue Service
    pronouncements:

              (i)  if a Participant's employment is terminated by reason of
         death or disability and the portion of any Incentive Stock Option that
         becomes exercisable during the post-termination period specified in
         Section 5(f) or (g) hereof exceeds the $100,000 limitation contained
         in Section 422(d) of the Code, such excess shall be treated as a
         Nonqualified Stock Option; and

              (ii) if the exercise of an Incentive Stock Option is accelerated
         by reason of a Change in Control, any portion of such Option that
         exceeds the $100,000 limitation contained in Section 422(d) of the
         Code shall be treated as a Nonqualified Stock Option.


         (j)  NO TANDEM OPTIONS.  Options consisting of both an Incentive Stock
    Option and a Nonqualified Stock Option shall not be granted under the Plan.

SECTION 6.    STOCK APPRECIATION RIGHTS

         (a)  GRANT AND EXERCISE.  Stock Appreciation Rights may be granted
    either alone ("Freestanding SAR") or in addition to other Awards granted
    under the Plan and may, but need not, relate to all or part of any Stock
    Option granted under the Plan ("Tandem SAR").  In the case of a
    Nonqualified Stock Option, a Tandem SAR may be granted either at or after
    the time of the grant of such Stock Option.  In the case of an Incentive
    Stock Option, a Tandem SAR may be granted only at the time of the grant of
    such Stock Option.

              A Tandem SAR shall terminate and no longer be exercisable upon
    the termination or exercise of the related Stock Option, subject to such
    provisions as the Committee may specify at grant where a Tandem SAR is
    granted with respect to less than the full number of shares covered by a
    related Stock Option.  Stock Options relating to exercised Tandem SARs
    shall no longer be exercisable to the extent that the related Tandem SARs
    have been exercised.


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<PAGE>

              A Stock Appreciation Right may be exercised, subject to Section
    6(b), in accordance with the procedures established by the Committee for
    such purpose and as set forth in the related Award Agreement.  Upon such
    exercise, the optionee shall be entitled to receive an amount determined in
    the manner prescribed in Section 6(b).

         (b)  TERMS AND CONDITIONS.  Stock Appreciation Rights shall be subject
    to such terms and conditions, not inconsistent with the provisions of the
    Plan, as shall be determined from time to time by the Committee, including
    the following:

              (i)  The exercise price of a Tandem SAR shall be the exercise
         price of the related Option.  The exercise price of a Freestanding SAR
         shall be not less than 100% of the Fair Market Value of the Stock on
         the date of grant of the Freestanding SAR.  Notwithstanding the
         foregoing, the Committee may unilaterally limit the appreciation in
         value of Stock attributable to an SAR at any time prior to its
         exercise.

              (ii) Stock Appreciation Rights shall be exercisable only at such
         time or times and to the extent provided in the related Award
         Agreement; provided, however, that the exercise provisions of an SAR
         granted in tandem with an Incentive Stock Option shall be the same as
         the related Option.

              (iii)     Upon the exercise of a Stock Appreciation Right, the
         holder shall be entitled to receive an amount in cash or shares of
         Stock equal in value to the excess of the Fair Market Value of one
         share of Stock on the date of exercise, or such other date as the
         Committee shall specify in the Award Agreement, over the exercise
         price per share specified in the related Award Agreement multiplied by
         the number of shares in respect of which the Stock Appreciation Right
         shall have been exercised, with the Committee having the right to
         determine the form of payment.  When payment is to be made in Stock,
         the number of shares to be paid shall be calculated on the basis of
         the Fair Market Value of the Stock on the date of exercise.

              (iv) Except as may be otherwise provided in the related Award
         Agreement, Stock Appreciation Rights shall not be transferable except
         under the laws of descent and distribution or pursuant to a qualified
         domestic relations order as defined by the Code or Title I of the
         Employee Retirement Income Security Act, or the rules thereunder, and
         shall be exercisable during the lifetime of the Participant only by
         the Participant.

              (v)  Upon the exercise of a Stock Appreciation Right, any related
         Stock Option or part thereof to which such Stock Appreciation Right is
         related shall be deemed to have been exercised for the purpose of the
         limitation set forth in Section 3 of the Plan on the number of shares
         of Stock to be issued under the Plan.


                                          10

<PAGE>

              (vi) The Committee, in its sole discretion, may also provide
         that, in the event of a Change in Control, the amount to be paid upon
         the exercise of a Stock Appreciation Right shall be based on the
         Change in Control Price, subject to such terms and conditions as the
         Committee may specify at grant.

SECTION 7.    RESTRICTED STOCK

         (a)  ADMINISTRATION.  Restricted Stock Awards may be granted either
    alone, in addition to, or in tandem with other Awards granted under the
    Plan for no consideration or for such minimum consideration as may be
    required by applicable law.  The Committee shall determine the persons to
    whom, and the time or times at which, grants of Restricted Stock will be
    made, the number of shares to be awarded, the price (if any) to be paid by
    the recipient of Restricted Stock, the time or times within which such
    Awards may be subject to forfeiture, and all other terms and conditions of
    the Awards.

         The Committee may condition the grant of Restricted Stock upon the
    attainment of specified performance goals or such other factors or criteria
    as the Committee shall determine, in its sole discretion, and the Committee
    may, after grant, change the Restriction Period or waive the restrictive
    limitations for all or any part of any Restricted Stock Award.

         The provisions of Restricted Stock Awards need not be the same with
    respect to each recipient. All Awards of Restricted Stock shall be
    evidenced by appropriate Award Agreements.

         (b)  CERTIFICATES.  Any Restricted Stock issued hereunder may be
    evidenced in such manner as the Committee, in its sole discretion, shall
    deem appropriate, including, without limitation, book-entry registration or
    issuance of a stock certificate or certificates.  Any such certificate
    shall be registered in the name of the Participant and shall bear an
    appropriate legend referring to the terms, conditions, and restrictions
    applicable to such Award.  The committee shall require that the stock
    certificates evidencing such shares be held in custody by the Company until
    the restrictions thereon shall have lapsed and that, as a condition of any
    Restricted Stock Award, the Participant shall have delivered a stock power,
    endorsed in blank, relating to the Stock covered by such Award.

         (c)  RESTRICTIONS AND CONDITIONS.  Except as may be otherwise provided
    in the related Award Agreement, during a period set by the Committee
    commencing with the date of such Award (the "Restriction Period"), the
    Participant shall not be permitted to sell, transfer, pledge, or assign
    shares of Restricted Stock awarded under the Plan but shall have all of the
    rights of a shareholder of the Company, including the right to vote the
    shares and the right to receive any dividends.

         The Committee, in its sole discretion, as determined at the time of
    award, may permit or require the payment of cash or stock dividends to be
    deferred and, if the Committee so determines, reinvested, subject to
    Section 14(f) hereof, in additional


                                          11

<PAGE>

    Restricted Stock subject to the same restrictions and other terms and
    conditions that apply to the shares with respect to which such dividends
    are issued, to the extent shares are available under Section 3, or
    otherwise reinvested.

         Upon termination of a Participant's employment with the Company or any
    Subsidiary, Parent, or Affiliate for any reason during the Restriction
    Period, all or a portion of the shares still subject to restriction may
    vest, or be forfeited, in accordance with the terms and conditions
    established by the Committee at or after grant.

SECTION 8.    DEFERRED STOCK

         (a)  ADMINISTRATION.  Deferred Stock may be awarded either alone, in
    addition to, or in tandem with other Awards granted under the Plan.  The
    Committee shall determine the persons to whom and the time or times at
    which Deferred Stock shall be awarded, the number of shares of Deferred
    Stock to be awarded to any person, the duration of the period (the
    "Deferral Period") during which, and the conditions under which, receipt of
    the Stock will be deferred, and the other terms and conditions of the Award
    in addition to those set forth in Section 8(b).

         The Committee may condition the grant of Deferred Stock upon the
    attainment of specified performance goals or such other factors or criteria
    as the Committee shall determine, in its sole discretion, and the Committee
    may, after grant, change the vesting period or waive the deferral
    limitations for all or any part of any Deferred Stock Award.

         The provisions of Deferred Stock Awards need not be the same with
    respect to each recipient.

         All Awards of Deferred Stock shall be evidenced by appropriate Award
    Agreements.

         (b)  TERMS AND CONDITIONS.  Except as may be otherwise provided in the
    related Award Agreement, Deferred Stock Awards may not be sold, assigned,
    transferred, pledged, or otherwise encumbered during the Deferral Period.
    At the expiration of the Deferral Period (or the Elective Deferral Period
    referred to below, where applicable), share certificates shall be delivered
    to the Participant, or his legal representative, representing the number of
    shares covered by the Deferred Stock Award.

         Any dividends declared during the Deferral Period with respect to
    shares covered by a Deferred Stock Award will be paid to the Participant
    currently, or deferred and deemed to be reinvested in additional Deferred
    Stock, or otherwise reinvested, all as determined at or after the time of
    the grant of the Award by the Committee, in its sole discretion.

         Upon termination of a Participant's employment with the Company or any
    Subsidiary, Parent, or Affiliate for any reason during the Deferral Period
    for a given Award, all or a portion of the Deferred Stock subject to the
    Award may vest, or be


                                          12

<PAGE>

    forfeited, in accordance with the terms and conditions established by the
    Committee at or after grant.

         A Participant may elect to further defer receipt of an Award (or an
    installment of an Award) for a specified period or until a specified event
    (the "Elective Deferral Period"), subject in each case to the Committee's
    approval and to such terms as are determined by the Committee, all in its
    sole discretion.  Subject to any exceptions adopted by the Committee, such
    election must generally be made at least 12 months prior to completion of
    the Deferral Period for such Deferred Stock Award (or such installment).

SECTION 9.    STOCK PURCHASE RIGHTS

         (a)  ELIGIBLE EMPLOYEES.  Any employee who has been continuously in
    the employment of the Company or any Parent or Subsidiary since the January
    1 preceding a particular Purchase Period (as defined in Section 9(k)(ii)),
    except (i) any employee customarily employed less than 20 hours weekly and
    (ii) any employee who, immediately after a right to purchase is granted,
    owns stock possessing 5% or more of the total combined voting power or
    value of all classes of stock of the Company or any Parent or Subsidiary
    (applying the rules of Section 425(d) of the Code to determine such stock
    ownership and treating the shares of Stock that the employee may purchase
    under outstanding options under this or any other plan of the Company or
    any Parent or Subsidiary as owned by the employee), shall be eligible to
    receive options under this Section 9 for a given Purchase Period.  Subject
    to the provisions of Section 9(d), an employee will continue to be eligible
    to receive options under this Section 9 so long as he or she remains
    eligible as defined herein.

         (b)  GRANT OF OPTION.  Each eligible employee who elects to
    participate is granted an option as of the first business day of the
    Purchase Period to purchase on the last business day of the Purchase Period
    that number of whole shares of Stock as could be purchased at a price equal
    to the price specified in Section 9(c) with the entire credit balance in
    the Participant's Stock Purchase Account (as defined) on such date;
    provided, however, that no right will be deemed to be granted or received
    hereunder which would permit a Participant to purchase Stock under this
    Plan and under all other stock purchase plans, if any, of the Company at a
    rate which exceeds $25,000 in Fair Market Value of Stock (determined as of
    the date the option is granted) for each calendar year.

         (c)  PURCHASE PRICE.  The purchase price will be the lesser of (i) 85%
    of the Fair Market Value (as defined in Section 1(l) hereof) of the Stock
    on the first business day of the Purchase Period or (ii) 85% of the Fair
    Market Value (as defined in Section 1(l) hereof) of the Stock on the last
    business day of the Purchase Period, in each case rounded up to the next
    higher full cent.

         (d)  ELECTION TO PARTICIPATE.  An eligible employee may elect to
    participate in the Plan for a given Purchase Period by filing with the
    Committee or a person designated


                                          13

<PAGE>

    by the Committee on or before the 30th day following commencement of that
    Purchase Period an appropriate document authorizing regular payroll
    deductions from Current Compensation (as defined herein) beginning with the
    first payday in the Purchase Period and continuing through the last payday
    in the Purchase Period or until the employee withdraws from the Plan or
    ceases to be eligible to participate in the Plan.

         (e)  METHOD OF PAYMENT.  A Participant may elect payroll deductions of
    any whole percentage from 2% through 10% of Current Compensation.  During
    the Purchase Period, the Participant may not reduce or increase his payroll
    deductions. However, the Participant may cease making payroll deductions at
    any time by providing written notice to the Committee.  Payroll deductions
    will be credited to a separate bookkeeping account established by the
    Company for each Participant (the "Stock Purchase Account") on each payday.
    Payroll deductions will not earn interest.

         The Stock Purchase Account is established solely for bookkeeping
    purposes, and all amounts credited to the Stock Purchase Account will
    remain part of the general assets of the Company. A Participant may not
    make any separate cash payment into his Stock Purchase Account.

         (f)  PURCHASE OF STOCK.  On the last business day of the Purchase
    Period, the entire credit balance in each Participant's Stock Purchase
    Account will be used to purchase the largest number of whole shares of
    Stock purchasable with such amount unless, prior to such date, the
    Participant elects to purchase a specified number of whole shares of Stock
    which is less than the number described above or elects to receive the
    entire credit balance in cash.  Any amount remaining in a Participant's
    Stock Purchase Account after such purchase (or the entire credit balance
    thereof if the Participant elects not to purchase any Stock) will be paid
    to the Participant in cash within 30 days after the end of the Purchase
    Period.

         As soon as practicable after each Purchase Period, the Company will
    cause to be delivered to the Participant a certificate representing the
    Stock purchased.

         The Company will not be required to issue or deliver any certificate
    representing Stock purchased hereunder prior to registration under the
    Securities Act of 1933, as amended, or registration or qualification under
    any state law if such registration or qualification is required.

         (g)  TERMINATION OF EMPLOYMENT.  Upon termination of employment for
    any reason other than death, retirement or sale of a portion or all of the
    Company's business, the Company will pay to the Participant in cash within
    thirty (30) days the entire credit balance in the Participant's Stock
    Purchase Account.

              Upon termination as a result of a sale of all or a portion of the
    Company's business, if so determined by the Board, in its sole discretion,
    the Participant may, within thirty (30) days after such termination, elect
    to purchase some or all of the shares of Stock he could have purchased with
    the balance in his Stock Purchase Account as of the date of


                                          14

<PAGE>

    termination.  The purchase price for any shares so purchased shall be the
    price described in Section 9(c)(i) hereof.  If such election is not made,
    the Company will pay to the Participant in cash within sixty (60) days of
    the termination, the entire balance remaining in the Participant's Stock
    Purchase Account.

              Upon termination due to death or retirement, the Participant or
    his estate may, within 180 days after such termination (60 days after
    termination in the case of retirement), elect to purchase some or all of
    the shares of Stock he could have purchased with the balance in his Stock
    Purchase Account as of the date of termination.  The purchase price for any
    shares so purchased shall be the price described in Section 9(c)(i) hereof.
    If such election is not made, the Company will pay to the Participant or
    his estate in cash within thirty (30) days of the failure to elect, the
    entire balance remaining in the Participant's Stock Purchase Account.

         For purposes of this Plan, an approved leave of absence or temporary
    layoff will not be deemed a termination of employment.

         (h)  NONTRANSFERABILITY.  An option granted pursuant to this Section 9
    shall not be transferable by the optionee otherwise than by will or the
    laws of descent and distribution and shall be exercisable, during the
    optionee's lifetime, only by the optionee.  The amounts credited to a Stock
    Purchase Account may not be assigned, transferred, pledged, or hypothecated
    in any way, and any attempted assignment, transfer, pledge, hypothecation,
    or other disposition of such amounts will be null and void and without
    effect.

         (i)  NO RIGHTS AS SHAREHOLDER.  An employee will have no interest in
    the Stock purchased until full payment has been made and a share
    certificate representing the same has been issued.

         (j)  DEFINITIONS.  For purposes of this Section 9, the following terms
    have the meanings set forth below:

         (i)  "CURRENT COMPENSATION" means the basic gross cash compensation
         (wage, salary, and sales incentives, including bonuses and
         commissions) paid by the Company or any Parent or Subsidiary to a
         Participant in accordance with the terms of employment, but excluding
         all overtime earnings, bonus payments, severance pay, and all other
         forms of compensation, and all remuneration which is not a term of the
         employment relationship (whether or not paid pursuant to a voluntary
         plan established by the Company or any Parent or Subsidiary).

         (ii) "PURCHASE PERIOD" means the 12-month period beginning on April 1
         of each year.


                                          15

<PAGE>

SECTION 10.   OTHER STOCK-BASED AWARDS

         (a)  ADMINISTRATION.  Other Awards of Stock and other Awards that are
    valued in whole or in part by reference to, or are otherwise based on,
    Stock ("Other Stock-Based Awards"), including, without limitation,
    performance shares, convertible preferred stock, convertible debentures, or
    exchangeable securities, may be granted either alone or in addition to or
    in tandem with Stock Options, Stock Appreciation Rights, Restricted Stock,
    Deferred Stock, or Stock Purchase Rights granted under the Plan.

         Subject to the provisions of the Plan, the Committee shall have
    authority to determine the persons to whom and the time or times at which
    such Awards shall be made, the number of shares of Stock to be awarded
    pursuant to such Awards, and all other conditions of the Awards.  The
    Committee may also provide for the grant of Stock upon the completion of a
    specified performance period.

         The provisions of Other Stock-Based Awards need not be the same with
    respect to each recipient.

         (b)  TERMS AND CONDITIONS.  Unless otherwise provided in the related
    Award Agreement, Stock subject to Awards made under this Section 10 may not
    be sold, assigned, transferred, pledged, or otherwise encumbered prior to
    the date on which the Stock is issued or, if later, the date on which any
    applicable restriction, performance, or deferral period lapses.

         The Participant shall be entitled to receive, currently or on a
    deferred basis, interest or dividends or interest or dividend equivalents
    with respect to the Stock covered by the Award, as determined at the time
    of the Award by the Committee, in its sole discretion, and the Committee
    may provide that such amounts (if any) shall be deemed to have been
    reinvested in additional Stock or otherwise reinvested.

         Any Award under Section 10 and any Stock covered by any such Award
    shall vest or be forfeited to the extent so provided in the Award
    Agreement, as determined by the Committee, in its sole discretion.

         In the event of the Participant's retirement, Disability, or death, or
    in cases of special circumstances, the Committee may, in its sole
    discretion, waive in whole or in part any or all of the remaining
    limitations imposed with respect to any or all of an Award under this
    Section 10.

         Each Award under this Section 10 shall be confirmed by, and subject to
    the terms of, an Award Agreement or other instrument entered into by the
    Company and the Participant.

         Stock (including securities convertible into Stock) issued on a bonus
    basis under this Section 10 may be issued for no cash consideration.  The
    purchase price of any Stock (including securities convertible into Stock)
    subject to a purchase right awarded under


                                          16

<PAGE>

    this Section 10 shall be at least 85% of the Fair Market Value of the Stock
    on the date of grant.

SECTION 11.   CHANGE IN CONTROL PROVISIONS

         (a)  IMPACT OF EVENT.  In the event of a "Change in Control" as
    defined in Section 11(b), the following provisions shall apply:

         (i)  Any Award, if so provided in the related Award Agreement, shall
         become fully exercisable and vested.

         (ii) The value of all outstanding Awards shall, unless otherwise
         determined by the Committee in its sole discretion at or after grant
         but prior to any Change in Control, be cashed out on the basis of the
         "Change in Control Price" as defined in Section 11(c) as of the date
         such Change in Control is determined to have occurred or such other
         date as the Committee may determine prior to the Change in Control.

         (b)  DEFINITION OF "CHANGE IN CONTROL".  For purposes of Section
    11(a), a "Change in Control" means the happening of any of the following:

         (i)  When any "person" as defined in Section 3(a)(9) of the Exchange
         Act and as used in Sections 13(d) and 14(d) thereof, including a
         "group" as defined in Section 13(d) of the Exchange Act, but excluding
         the Company or any Subsidiary or Parent or any employee benefit plan
         sponsored or maintained by the Company or any Subsidiary or Parent
         (including any trustee of such plan acting as trustee), directly or
         indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3
         under the Exchange Act, as amended from time to time), of securities
         of the Company representing 20 percent or more of the combined voting
         power of the Company's then outstanding securities;

         (ii) When, during any period of 24 consecutive months during the
         existence of the Plan, the individuals who, at the beginning of such
         period, constitute the Board (the "Incumbent Directors") cease for any
         reason other than death to constitute at least a majority thereof;
         provided, however, that a director who was not a director at the
         beginning of such 24-month period shall be deemed to have satisfied
         such 24-month requirement (and be an Incumbent Director) if such
         director was elected by, or on the recommendation of, or with the
         approval of, at least 60% of the directors who then qualified as
         Incumbent Directors either actually (because they were directors at
         the beginning of such 24-month period) or by prior operation of this
         Section 11(b)(ii); or

         (iii)     The approval by the shareholders of an acquisition of the
         Company by an entity other than the Company or a Subsidiary or Parent
         through purchase of assets, or by merger, or otherwise.


                                          17

<PAGE>

         (c)  CHANGE IN CONTROL PRICE.  For purposes of this Section 11,
    "Change in Control Price" means the highest price per share paid in any
    transaction reported on any market on which the Company's Stock is traded
    or paid or offered in any bona fide transaction related to the Change in
    Control of the Company at any time during the 60-day period immediately
    preceding the occurrence of the Change in Control, except that, in the case
    of Incentive Stock Options and Stock Appreciation Rights relating to
    Incentive Stock Options, such price shall be based only on transactions
    reported for the date on which the optionee exercises such Stock
    Appreciation Rights or, where applicable, the date on which a cashout
    occurs under Section 11(a)(ii).

SECTION 12.   AMENDMENTS AND TERMINATION

    The Board may amend, alter, discontinue, or terminate the Plan, or any
portion thereof, but no amendment, alteration, or discontinuation shall be made
which would impair the vested rights of a Participant under any Award
theretofore granted, without the Participant's consent, or which, without the
approval of the Company's stockholders, would:

         (a)  except as expressly provided in this Plan, increase the total
    number of shares reserved for the purpose of the Plan;

         (b)  authorize an increase in the total number of shares reserved for
    issuance upon exercise of Incentive Stock Options;

         (c)  decrease the option price of any Incentive Stock Option to less
    than 100% of the Fair Market Value on the date of grant or change the
    pricing terms of Section 9(c);

         (d)  increase the rate of payroll deductions under Section 9 to more
    than 15% of Current Compensation;

         (e)  permit the issuance of Stock prior to payment in full therefor;

         (f)  change the employees or class of employees eligible to
    participate in the Plan; or

         (g)  extend the maximum option period under Section 5(i) of the Plan
    or extend a Participant's right to purchase Stock pursuant to the grant of
    an option under Section 9 hereof to a date more than five years from the
    date of such grant.

    The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the vested rights of any holder without the holder's
consent.  The Committee may also substitute new Stock Options for previously
granted Stock Options (on a one-for-one or other basis), including previously
granted Stock Options having higher option exercise prices.



                                          18

<PAGE>

    Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.

SECTION 13.   UNFUNDED STATUS OF PLAN

    The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation.  With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.  In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Stock or payments in lieu of or with respect to Awards hereunder;
provided, however, that, unless the Committee otherwise determines with the
consent of the affected Participant, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

SECTION 14.   GENERAL PROVISIONS

         (a)  The Committee may require each person purchasing shares pursuant
    to a Stock Option or receiving shares pursuant to any other Award under the
    Plan to represent to and agree with the Company in writing that the
    Participant is acquiring the shares without a view to distribution thereof.
    The certificates for such shares may include any legend which the Committee
    deems appropriate to reflect any restrictions on transfer.

         All certificates for shares of Stock or other securities delivered
    under the Plan shall be subject to such stop transfer orders and other
    restrictions as the Committee may deem advisable under the rules,
    regulations, and other requirements of the Securities and Exchange
    Commission, any over-the-counter market on which the Stock is quoted, any
    stock exchange upon which the Stock is then listed, and any applicable
    federal or state securities law, and the Committee may cause a legend or
    legends to be put on any such certificates to make appropriate reference to
    such restrictions.

         (b)  The Committee may at any time offer to buy out for a payment in
    cash, Stock, Deferred Stock, or Restricted Stock an Award previously
    granted, based on such terms and conditions as the Committee shall
    establish and communicate to the Participant at the time that such offer is
    made.

         (c)  Nothing contained in this Plan shall prevent the Board from
    adopting other or additional compensation arrangements, subject to
    shareholder approval if such approval is required; and such arrangements
    may be either generally applicable or applicable only in specific cases.

         (d)  Neither the adoption of the Plan nor the grant of any Award
    hereunder shall confer upon any employee of the Company or any Subsidiary,
    Parent, or Affiliate any right to continued employment with the Company or a
    Subsidiary, Parent, or 


                                          19

<PAGE>

    Affiliate, as the case may be, or interfere in any way with the right of
    the Company or a Subsidiary, Parent, or Affiliate to terminate the
    employment of any of its employees at any time.


         (e)  No later than the date as of which an amount first becomes
    includible in the gross income of the Participant for federal income tax
    purposes with respect to any Award under the Plan, the Participant shall
    pay to the Company, or make arrangements satisfactory to the Committee
    regarding the payment of, any federal, state, or local taxes of any kind
    required by law to be withheld with respect to such amount. The obligations
    of the Company under the Plan shall be conditional on such payment or
    arrangements, and the Company and any Subsidiary, Parent, or Affiliate
    shall, to the extent permitted by law, have the right to deduct any such
    taxes from any payment of any kind otherwise due to the Participant.
    Unless otherwise determined by the Committee, withholding obligations may
    be settled with Stock, including Stock that is part of the Award that gives
    rise to the withholding requirement.

         (f)  The actual or deemed reinvestment of dividends or dividend
    equivalents in additional Restricted Stock (or in Deferred Stock or other
    types of Plan Awards) at the time of any dividend payment shall only be
    permissible if sufficient shares of Stock are available under Section 3 for
    such reinvestment (taking into account then outstanding Stock Options,
    Stock Purchase Rights, and other Plan Awards).

         (g)  To the extent that federal laws (such as the Code, the Exchange
    Act, or the Employee Retirement Income Security Act of 1974) do not
    otherwise control, this Plan and all Awards made and actions taken
    hereunder shall be governed by and construed in accordance with the laws of
    the State of Minnesota.

         (h)  Unless otherwise provided by the related Award Agreement, no
    rights granted hereunder may be assigned, transferred, pledged, or
    hypothecated (whether by operation or otherwise) or be subject to
    execution, attachment, or similar process, and any attempted assignment,
    transfer, pledge, hypothecation, or other disposition or levy of attachment
    or similar process upon any such right will be null and void and without
    effect.

         (i)  If any term, provision, or portion of this Plan or any Award
    granted hereunder shall be deemed unenforceable or in violation of
    applicable law, such term, provision, or portion of the Plan or the Award
    shall be deemed severable from all other terms, provisions, or portions of
    this Plan or the Award or any other Awards granted hereunder, which shall
    otherwise continue in full force and effect.

SECTION 15.   EFFECTIVE DATE OF PLAN

    The Plan shall be effective as of April 3, 1989, subject to the approval of
the Plan by a majority of the votes cast by the holders of the Company's Common
Stock at the annual shareholders' meeting next following adoption of the Plan.
Any grants made under the Plan prior


                                          20

<PAGE>

to such approval shall be effective when made (unless otherwise specified by the
Committee at the time of grant), but shall be conditioned on, and subject to,
such approval of the Plan by such shareholders.

SECTION 16.   TERM OF PLAN

    No Incentive Stock Option shall be granted pursuant to the Plan on or after
the tenth anniversary of the date of adoption of the Plan, but Incentive Stock
Options granted prior to such tenth anniversary may extend beyond that date.
All other Awards may be granted at any time and for any period unless otherwise
provided by the Plan.

SECTION 17.   APPLICABILITY TO GRANTS UNDER OTHER COMPANY PLANS

    Subject to shareholder approval of the Plan (in accordance with Section 15
above), no further options shall be granted under the 1981 Incentive Stock
Option Plan and the 1984 Nonqualified Stock Option Plan, both of which shall
remain in effect until all options granted pursuant thereto have been exercised
or have expired or terminated by their terms.  The share authorization
provisions of the 1981 Incentive Stock Option Plan and the 1984 Nonqualified
Stock Option Plan shall operate independently of Section 3 of the Plan.





                                          21