Exhibit 10.1


 


PROUROCARE MEDICAL INC.


 


2009 STOCK PLAN


 


Adopted February 26, 2009 and amended June 4,
2009


 


1.     Purpose.


 


The purpose of the 2009 Stock Plan (the “Plan”) of
ProUroCare Medical Inc. (the “Company”), a Nevada corporation, is to increase
shareholder value and to advance the interests of the Company by furnishing a
variety of economic incentives (variously referred to hereinafter as the “Incentives”)
designed to attract, retain and motivate employees, directors and
consultants.  Incentives may consist of
opportunities to purchase or receive shares of the Company’s $0.00001 par value
common stock, (the “Common Stock”), monetary payments, or both, on terms and
conditions determined under this Plan.


 


2.     Administration.


 


2.1   The Plan
shall be administered by a committee of the Company’s board of directors (the “Committee”).  The Committee shall consist of not less than
two directors of the Company who shall be appointed from time to time by the
Company’s board of directors.  Each
member of the Committee shall qualify both as a “non-employee director” within
the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated thereunder,
the “Exchange Act”), and as an “outside director” as defined in Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”).  The Committee shall have complete discretion
and authority to determine all provisions of all Incentives awarded under the
Plan (consistent with the terms of the Plan), interpret the Plan, and make any
other determination which it believes necessary and advisable for the proper
administration of the Plan.  The
Committee’s decisions and matters relating to the Plan shall be final and
conclusive for the Company and its participants.  No member of the Committee will be liable for
any action or determination made in good faith with respect to the Plan or any
Incentives granted under the Plan.  The
Committee will also have the authority under the Plan to amend or modify the
terms of any outstanding Incentives in any manner; provided,
however, that any such amended or modified terms are permitted by
the Plan as then in effect, and any recipient of an Incentive adversely
affected by such amended or modified terms has consented to such amendment or
modification.  No amendment or
modification to an Incentive, however, whether pursuant to this Section 2
or any other provisions of the Plan, will be deemed to be a re-grant of such
Incentive for purposes of this Plan.  If
at any time there is no Committee, then for purposes of the Plan the term “Committee”
shall mean the Company’s board of directors.


 


2.2   In the
event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, extraordinary dividend or divestiture, including a
spinoff, or any other similar change in corporate structure or shares, (ii) any
purchase, acquisition, sale or disposition of a significant amount of assets or
a significant business, (iii) any change in accounting principles or
practices, or (iv) any other similar change, in each case with respect to
the Company or any other entity whose performance is relevant to the grant or
vesting of an Incentive, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation) may, without the consent of any affected recipient of an
Incentive, amend or modify the vesting criteria of any outstanding Incentive
based, in whole or in part, on the financial performance of the Company (or any
subsidiary or division thereof) or such other entity so as


 

















 


equitably to reflect such event, with the desired result that the
criteria for evaluating such financial performance of the Company or such other
entity will be substantially the same (in the sole discretion of the Committee
or the board of directors of the surviving corporation) following such event as
prior to such event; provided, however,
that the amended or modified terms are permitted by the Plan as then in effect.


 


3.     Eligible Participants.


 


Employees of the Company or its subsidiaries,
including officers and employees of the Company or its subsidiaries), directors
and consultants, advisors or other independent contractors who provide services
to the Company or its subsidiaries, including members of any advisory board,
shall become eligible to receive Incentives under the Plan when designated by
the Committee.  Participants may be
designated individually or by groups or categories (for example, by pay grade)
as the Committee deems appropriate. 
Participation by Company officers or its subsidiaries and any
performance objectives relating to such officers must be approved by the
Committee.  Participation by others and
any performance objectives relating to others may be approved by groups or
categories (for example, by pay grade) and authority to designate
participants who are not officers and to set or modify such performance
objectives may be delegated.


 


4.     Types of Incentives.


 


Incentives under the Plan may be granted in any
combination of the following forms:  (a) incentive
stock options and non-statutory stock options under Section 6; (b) stock-appreciation
rights (“SARs”) under Section 7; (c) stock awards under Section 8;
(d) restricted stock under Section 8; and (e) performance shares
under Section 9.


 


5.     Shares Subject to the
Plan.


 


5.1   Number
of Shares.  Subject to adjustment as
provided in Section 11.5, the number of shares of Common Stock which may
be issued under the Plan shall not exceed 1,200,000 shares of Common
Stock.  Shares of Common Stock issued
under the Plan or that are currently subject to outstanding Incentives will be
applied to reduce the maximum number of shares of Common Stock remaining
available for issuance under the Plan.


 


5.2   Cancellation.  To the extent that cash in lieu of shares of
Common Stock is delivered upon the exercise of an SAR pursuant to Section 7.4,
the Company shall be deemed, for purposes of applying the limitation on the
number of shares, to have issued the greater of the number of shares of Common
Stock which it was entitled to issue upon such exercise or upon the exercise of
any related option.  In the event that a
stock option or SAR granted hereunder expires or is terminated or canceled
unexercised or unvested as to any shares of Common Stock, such shares may again
be issued under the Plan either pursuant to stock options, SARs or
otherwise.  In the event that shares of
Common Stock are issued hereunder as restricted stock or pursuant to a stock
award and thereafter are forfeited or reacquired by the Company pursuant to
rights reserved upon issuance thereof, such forfeited and reacquired shares may
again be issued under the Plan, either as restricted stock, pursuant to stock
awards or otherwise.  The Committee may
also determine to cancel, and agree to the cancellation of, stock options in
order to make a participant eligible for the grant of a stock option at a lower
price than the option to be canceled.


 


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6.     Stock Options.


 


A stock option is a right to purchase shares of Common
Stock from the Company.  The Committee
may designate whether an option is to be considered an incentive stock option
or a non-statutory stock option.  To the
extent that any incentive stock option granted under the Plan ceases for any
reason to qualify as an “incentive stock option” for purposes of Section 422
of the Code, such incentive stock option will continue to be outstanding for
purposes of the Plan but will thereafter be deemed to be a non-statutory stock
option.  Each stock option granted by the
Committee under this Plan shall be subject to the following terms and
conditions:


 


6.1   Price.  The option price per share shall be determined
by the Committee, subject to adjustment under Section 11.5.


 


6.2   Number.  The number of shares of Common Stock subject
to the option shall be determined by the Committee, subject to adjustment as
provided in Section 11.5.  The
number of shares of Common Stock subject to a stock option shall be reduced in
the same proportion that the holder thereof exercises a SAR if any SAR is
granted in conjunction with or related to the stock option.  To the extent required by Section 162(m) of
the Code, as amended (the “Code”), and the rules and regulations
thereunder, no individual may receive options to purchase more than 200,000
shares (subject to adjustment as provided in Section 11.5) in any year.


 


6.3   Term and
Time for Exercise.  Subject to
earlier termination as provided in Section 11.4, the term of each stock
option shall be determined by the Committee but shall not exceed ten (10) years
and one day from the date of grant.  Each
stock option shall become exercisable at such time or times during its term as shall
be determined by the Committee at the time of grant.  The Committee may in its discretion
accelerate the exercisability of any stock option.  Subject to the foregoing and with the
approval of the Committee, all or any part of the shares of Common Stock with
respect to which the right to purchase has accrued may be purchased by the
Company at the time of such accrual or at any time or times thereafter during
the term of the option.


 


6.4   Manner
of Exercise.  Subject to the
conditions contained in this Plan and in the agreement with the recipient
evidencing such option, a stock option may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number of shares of
Common Stock to be purchased and accompanied by the full purchase price for
such shares.  The exercise price shall be
payable (a) in United States dollars upon exercise of the option and may
be paid by cash; uncertified or certified check; or bank draft; (b) at the
discretion of the Committee, by delivery of shares of Common Stock already
owned by the participant in payment of all or any part of the exercise price,
which shares shall be valued for this purpose at the Fair Market Value (as
defined in Section 11.12 below) on the date such option is exercised; or (c) at
the discretion of the Committee, by instructing the Company to withhold from
the shares of Common Stock issuable upon exercise of the stock option shares of
Common Stock in payment of all or any part of the exercise price and/or any
related withholding-tax obligations, which shares shall be valued for this
purpose at the Fair Market Value or in such other manner as may be authorized
from time to time by the Committee.  Any
shares of Common Stock delivered by a participant pursuant to clause (b) above
must have been held by the participant for a period of not less than six (6) months
prior to the exercise of the option, unless otherwise determined by the
Committee.  Prior to the issuance of
shares of Common Stock upon the exercise of a stock option, a participant shall
have no rights as a shareholder with respect to shares of Common Stock issuable
under such stock option.  Except as
otherwise provided in the Plan, no adjustment will be made for dividends or
distributions declared as of a record date preceding the date on which a
participant becomes the 


 


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holder of record of shares of Common Stock acquired upon exercise of a
stock option, except as the Committee may determine in its sole discretion.


 


6.5   Incentive
Stock Options.  Notwithstanding
anything in the Plan to the contrary, the following additional provisions shall
apply to the grant of stock options which are intended to qualify as incentive
stock options (as such term is defined in Section 422 of the Code):


 


(a)   The
aggregate Fair Market Value (determined as of the time the option is granted)
of the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by any participant during any calendar year (under
the Plan and any other incentive stock-option plans of the Company or any
subsidiary or parent corporation of the Company) shall not exceed
$100,000.  The determination will be made
by taking incentive stock options into account in the order in which they were
granted.


 


(b)   Any
certificate for an incentive stock option authorized under the Plan shall
contain such other provisions as the Committee shall deem advisable, but shall
in all events be consistent with and contain all provisions required in order
to qualify the options as incentive stock options.


 


(c)   All
incentive stock options must be granted within ten (10) years from the
earlier of the date on which this Plan was adopted by board of directors or the
date this Plan was approved by the Company’s shareholders.


 


(d)   Unless
sooner exercised, all incentive stock options shall expire no later than ten (10) years
after the date of grant.  No incentive
stock option may be exercisable after ten (10) years from its date of
grant (or five (5) years from its date of grant if, at the time of grant,
the participant owns, directly or indirectly, more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company).


 


(e)   The exercise
price for a share of Common Stock under an incentive stock options shall be not
less than one hundred percent (100%) of the Fair Market Value of one share of
Common Stock on the date of grant; provided, however,
that the exercise price shall be one hundred ten percent (110%) of the Fair
Market Value if, at the time the incentive stock option is granted, the
participant owns, directly or indirectly, more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company.


 


7.     Stock-Appreciation
Rights.


 


An SAR is a right to receive, without payment to the
Company, a number of shares of Common Stock, cash, or any combination thereof,
the amount of which is determined pursuant to the formula set forth in Section 7.4.  An SAR may be granted (a) with respect
to any stock option granted under this Plan, either concurrently with the grant
of such stock option or at such later time as determined by the Committee (as
to all or any portion of the shares of Common Stock subject to the stock
option), or (b) alone, without reference to any related stock option.  Each SAR granted by the Committee under this
Plan shall be subject to the following terms and conditions:


 


7.1   Number;
Exercise Price.  Each SAR granted to
any participant shall relate to such number of shares of Common Stock as shall
be determined by the Committee, subject to adjustment as provided in Section 11.5.  In the case of an SAR granted with respect to
a stock 


 


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option, the number of shares of Common Stock to which the SAR pertains
shall be reduced in the same proportion that the holder of the option exercises
the related stock option.  The exercise
price of an SAR will be determined by the Committee, in its discretion, at the
date of grant but may not be less than one hundred percent (100%) of the Fair
Market Value of one share of Common Stock on the date of grant.


 


7.2   Duration.  Subject to earlier termination as provided in
Section 11.4, the term of each SAR shall be determined by the Committee
but shall not exceed ten (10) years and one day from the date of
grant.  Unless otherwise provided by the
Committee, each SAR shall become exercisable at such time or times, to such
extent and upon such conditions as the stock option, if any, to which it
relates is exercisable.  The Committee
may in its discretion accelerate the exercisability of any SAR.


 


7.3   Exercise.  An SAR may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number of SARs which
the holder wishes to exercise.  Upon
receipt of such written notice, the Company shall, within ninety (90) days
thereafter, deliver to the exercising holder certificates for the shares of Common
Stock or cash, or both, as determined by the Committee, to which the holder is
entitled pursuant to Section 7.4.


 


7.4   Payment.  Subject to the right of the Committee to
deliver cash in lieu of shares of Common Stock (which, as it pertains to
Company officers and directors, shall comply with all requirements of the
Exchange Act), the number of shares of Common Stock which shall be issuable
upon the exercise of an SAR shall be determined by dividing:


 


(a)   the number
of shares of Common Stock as to which the SAR is exercised multiplied by the
amount of the appreciation in such shares (i.e., the amount by which the Fair
Market Value of the shares of Common Stock subject to the SAR on the exercise
date exceeds (1) in the case of an SAR related to a stock option, the
exercise price of the shares of Common Stock under the stock option or (2) in
the case of an SAR granted alone and without reference to a related stock
option, an amount which shall be determined by the Committee at the time of
grant, subject to adjustment under Section 11.5); by


 


(b)   the Fair
Market Value of a share of Common Stock on the exercise date.


 


In lieu of issuing shares
of Common Stock upon the exercise of a SAR, the Committee may elect to pay the
holder of the SAR cash equal to the Fair Market Value on the exercise date of
any or all of the shares which would otherwise be issuable.  No fractional shares of Common Stock shall be
issued upon the exercise of an SAR; instead, the holder of the SAR shall be
entitled to receive a cash adjustment equal to the same fraction of the Fair
Market Value of a share of Common Stock on the exercise date or to purchase the
portion necessary to make a whole share at its Fair Market Value on the date of
exercise.


 


8.     Stock Awards and
Restricted Stock.


 


A stock award consists of the transfer by the Company
to a participant of shares of Common Stock, without other payment therefor, as
additional compensation for services rendered to the Company.  The participant receiving a stock award will
have all voting, dividend, liquidation and other rights with respect to the
shares of Common Stock issued to a participant as a stock award under this Section 8
upon the participant becoming the holder of record of such shares.  A share of restricted stock consists of shares
of Common Stock which are sold or transferred by the Company to a participant
at a price determined by the 


 


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Committee (which price shall be at least equal to the
minimum price required by applicable law for the issuance of a share of Common
Stock) and subject to restrictions on their sale or other transfer by the
participant, which restrictions and conditions may be determined by the
Committee as long as such restrictions and conditions are not inconsistent with
the terms of the Plan.  The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:


 


8.1   Number
of Shares.  The number of shares to
be transferred or sold by the Company to a participant pursuant to a stock
award or as restricted stock shall be determined by the Committee.


 


8.2   Sale
Price.  The Committee shall determine
the price, if any, at which shares of restricted stock shall be sold or granted
to a participant, which may vary from time to time and among participants and
which may be below the Fair Market Value of such shares of Common Stock at the
date of sale.


 


8.3   Restrictions.  All shares of restricted stock transferred or
sold hereunder shall be subject to such restrictions as the Committee may
determine, including without limitation any or all of the following:


 


(a)   a
prohibition against the sale, transfer, pledge or other encumbrance of the
shares of restricted stock, such prohibition to lapse at such time or times as
the Committee shall determine (whether in annual or more frequent installments,
at the time of the death, disability or retirement of the holder of such
shares, or otherwise);


 


(b)   a
requirement that the holder of shares of restricted stock forfeit, or (in the
case of shares sold to a participant) resell back to the Company at his or her
cost, all or a part of such shares in the event of termination of his or her
employment or consulting engagement during any period in which such shares are
subject to restrictions; or


 


(c)   such other
conditions or restrictions as the Committee may deem advisable.


 


In order to enforce the
restrictions imposed by the Committee pursuant to Section 8.3, the
participant receiving restricted stock shall enter into an agreement with the
Company setting forth the conditions of the grant.  Shares of restricted stock shall be
registered in the name of the participant and deposited, together with a stock
power endorsed in blank, with the Company unless otherwise determined by the
Committee.  Each such certificate shall
bear a legend in substantially the following form:


 


THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK REPRESENTED BY IT ARE SUBJECT TO THE TERMS AND CONDITIONS
(INCLUDING CONDITIONS OF FORFEITURE) CONTAINED IN THE 2009 STOCK OPTION PLAN OF
PROUROCARE MEDICAL INC., (THE “COMPANY”), AND AN AGREEMENT ENTERED INTO BETWEEN
THE REGISTERED OWNER AND THE COMPANY.  A
COPY OF THE 2009 STOCK OPTION PLAN AND THE AGREEMENT IS AVAILABLE FROM THE
COMPANY UPON REQUEST.


 


8.4   End of
Restrictions.  Subject to Section 11.3,
at the end of any time period during which the shares of restricted stock are
subject to forfeiture and restrictions on transfer, such 


 


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shares will be delivered free of all restrictions to the participant or
to the participant’s legal representative, beneficiary or heir.


 


8.5   Shareholder.  Subject to the terms and conditions of the
Plan, each participant receiving restricted stock shall have all the rights of
a shareholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including
without limitation the right to vote such shares.  Dividends paid in cash or property other than
Common Stock with respect to shares of restricted stock shall be paid to the
participant currently.  Unless the
Committee determines otherwise in its sole discretion, any dividends or
distributions (including regular quarterly cash dividends) paid with respect to
shares of Common Stock subject to the restrictions set forth above will be
subject to the same restrictions as the shares to which such dividends or
distributions relate.  In the event the
Committee determines not to pay dividends or distributions currently, the
Committee will determine in its sole discretion whether any interest will be
paid on such dividends or distributions. 
In addition, the Committee in its sole discretion may require such
dividends and distributions to be reinvested (and in such case the participant
consents to such reinvestment) in shares of Common Stock that will be subject
to the same restrictions as the shares to which such dividends or distributions
relate.


 


9.     Performance Shares.


 


A performance share consists of an award which shall be paid in shares
of Common Stock, as described below.  The
grant of a performance share shall be subject to such terms and conditions as
the Committee deems appropriate, including the following:


 


9.1   Performance
Objectives.  Each performance share
will be subject to performance objectives respecting the Company or one of its
operating units to be achieved by the participant before the end of a specified
period.  The Committee shall determine
the terms and conditions of each grant and the number of performance shares
granted.  If the performance objectives
are achieved, the participant will be paid in shares of Common Stock as
determined by the Committee.  If such
objectives are not met, each grant of performance shares may provide for lesser
payments in accordance with formulae established in the award.


 


9.2   Not
Shareholder.  The grant of
performance shares to a participant shall not create any rights in such
participant as a shareholder of the Company, until the payment of shares of
Common Stock with respect to an award.


 


9.3   No
Adjustments.  No adjustment shall be
made in performance shares granted on account of cash dividends which may be
paid or other rights which may be issued to the holders of Common Stock prior
to the end of any period for which performance objectives were established.


 


9.4   Expiration
of Performance Shares.  If any
participant’s employment or consulting engagement with the Company is
terminated for any reason other than normal retirement, death or disability
prior to the achievement of the participant’s stated performance objectives,
all the participant’s rights on the performance shares shall expire and
terminate unless otherwise determined by the Committee.  In the event of termination of employment or
consulting by reason of death, disability, or normal retirement, the Committee,
in its own discretion may determine what portions, if any, of the performance
shares should be paid to the participant.


 


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10.                                 Change of Control.


 


10.1                         Change in Control. 
For purposes of this Section 10, a “Change in Control” of the
Company will mean the following:


 


(a)                                  The purchase or other acquisition by any
one person, or more than one person acting as a group, of stock of the Company
that, together with stock held by such person or group, constitutes more than
fifty percent (50%) of the total combined value or total combined voting power
of all classes of stock issued by the Company; provided, however, that if any
one person or more than one person acting as a group is considered to own more
than fifty percent (50%) of the total combined value or total combined voting
power of such stock, the acquisition of additional stock by the same person or
persons shall not be considered a Change of Control;


 


(b)                                 A merger or consolidation to which the
Company is a party if the individuals and entities who were shareholders of the
Company immediately prior to the effective date of such merger or consolidation
have, immediately following the effective date of such merger or consolidation,
beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of the total combined
voting power of all classes of securities issued by the surviving entity for
the election of directors of the surviving corporation;


 


(c)                                  Any one person, or more than one person
acting as a group, acquires or has acquired during the twelve (12) month period
ending on the date of the most recent acquisition by such person or persons,
direct or indirect beneficial ownership (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of stock of the Company constituting more
than thirty (30%) of the total combined voting power of all classes of stock
issued by the Company;


 


(d)                                 The purchase or other acquisition by any
one person, or more than one person acting as a group, of substantially all of
the total gross value of the assets of the Company during the twelve-month
period ending on the date of the most recent purchase or other acquisition by
such person or persons.  For purposes of
this Section 2(d), “gross value” means the value of the assets of the
Company or the value of the assets being disposed of, as the case may be,
determined without regard to any liabilities associated with such assets;


 


(e)                                  A change in the composition of the Board
of the Company at any time during any consecutive twelve (12) month period such
that the “Continuity Directors” cease for any reason to constitute at least a
majority of the Board. For purposes of this event, “Continuity Directors” means
those members of the Board who either:


 


(1)                                  were directors at the beginning of such
consecutive twelve (12) month period; or


 


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(2)                                  were elected by, or on the nomination or
recommendation of, at least a majority of the then-existing Board of Directors.


 


In all cases, the determination of whether a Change of Control Event
has occurred shall be made in accordance with Code Section 409A and the
regulations, notices and other guidance of general applicability issued
thereunder.


 


10.2.                      Acceleration of Incentives. 
Without limiting the authority of the Committee under the Plan, if a
Change in Control of the Company occurs whereby the acquiring entity or
successor to the Company does not assume the Incentives or replace them with
substantially equivalent incentive awards, then, unless otherwise provided by
the Committee in its sole discretion in the agreement evidencing an Incentive
at the time of grant, as of the date of the Change of Control:  (a) all outstanding options and SARs
will vest and will become immediately exercisable in full and will remain
exercisable for the remainder of their respective terms, regardless of whether
the participant to whom such options or SARs have been granted remains in the
employ or service of the Company or any subsidiary of the Company or any
acquiring entity or successor to the Company; (b) the restrictions on all
shares of restricted stock awards shall lapse immediately; and (c) all
performance shares shall be deemed to be met and payment made immediately.


 


10.3.                      Cash Payment for Options. 
If a Change in Control of the Company occurs, then the Committee, if
approved by the Committee in its sole discretion either in an agreement
evidencing an option at the time of grant or at any time after the grant of an
option, and without the consent of any participant affected thereby, may
determine that:


 


(a)                                    some or all participants holding
outstanding stock options will receive, with respect to some or all of the
shares of Common Stock subject to such options, as of the effective date of any
such Change in Control of the Company, cash in an amount equal to the excess of
the Fair Market Value of such shares immediately prior to the effective date of
such Change in Control of the Company over the exercise price per share of such
options; and


 


(b)                                   any options as to which, as of the
effective date of any such Change in Control, the Fair Market Value of the
shares of Common Stock subject to such options is less than or equal to the
exercise price per share of such options, shall terminate as of the effective
date of any such Change in Control.


 


If the Committee makes a
determination as set forth in subparagraph (a) of this Section 10.3,
then, as of the effective date of any such Change in Control of the Company,
such options will terminate as to such shares and the participants formerly
holding such options will only have the right to receive such cash payment(s).  If the Committee makes a determination as set
forth in subparagraph (b) of this Section 10.3, then, as of the
effective date of any such Change in Control of the Company, such options will
terminate, become void and expire as to all unexercised shares of Common Stock
subject to such options on such date, and the participants formerly holding
such options will have no further rights with respect to such options.


 


11.         General.


 


11.1                           Effective Date. 
The Plan will become effective upon its approval by the affirmative vote
of the holders of a majority of the voting power of the shares of the Company’s
Common Stock present and entitled to vote at a meeting of the stockholders.
Unless approved 


 


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within one year after the date of the Plan’s adoption by the board of
directors, the Plan shall not be effective for any purpose.


 


11.2                           Duration.  The Plan
shall remain in effect until all Incentives granted under the Plan have either
been satisfied by the issuance of shares of Common Stock or the payment of cash
or have been terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their issuance under the
Plan have lapsed.  No Incentives may be
granted under the Plan after the tenth anniversary of the date the Plan is
approved by the shareholders of the Company.


 


11.3                           Non-Transferability of Incentives. 
No Incentive Stock Option, SAR, restricted stock or performance award
may be transferred, pledged or assigned by the holder thereof (except, in the
event of the holder’s death, by will or the laws of descent and distribution to
the limited extent provided in the Plan or the Incentive, 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 the
Company shall not be required to recognize any attempted assignment of such
rights by any participant.  Incentive
Stock Options transferred (except as permitted in the preceding sentence) will
continue to be outstanding for purposes of the Plan but will thereafter be
deemed to be a non-qualified stock option. 
Non-qualified stock options may be transferred by the holder thereof
only to such holder’s spouse, children, grandchildren or parents (collectively,
the “Family Members”), to trusts for the benefit of Family Members, to
partnerships or limited liability companies in which Family Members are the
only partners or shareholders, or to entities exempt from federal income
taxation pursuant to Section 501(c)(3) of the Code.  During a participant’s lifetime, a stock
option may be exercised only by him or her, by his or her guardian or legal
representative or by the transferees permitted by this Section 11.3.


 


11.4                           Effect of Termination or Death.  In the event that a participant ceases to be
an employee of or consultant to the Company, or the participant’s other service
with the Company is terminated, for any reason, including death, any Incentives
may be exercised or shall expire at such times as may be determined by the
Committee in its sole discretion in the agreement evidencing an Incentive.  Notwithstanding the other provisions of this
Section 11.4, upon a participant’s termination of employment or other
service with the Company and all subsidiaries, the Committee may, in its sole
discretion (which may be exercised at any time on or after the date of grant,
including following such termination), cause options and SARs (or any part
thereof) then held by such participant to become or continue to become
exercisable and/or remain exercisable following such termination of employment
or service and restricted stock awards, performance shares and stock awards
then held by such participant to vest and/or continue to vest or become free of
transfer restrictions, as the case may be, following such termination of
employment or service, in each case in the manner determined by the Committee;
provided, however, that no option or SAR may remain exercisable or continue to
vest beyond the earlier of (i) the latest date upon which the Incentive
could have expired by its original terms, and (ii) the tenth (10th)
anniversary of the original date of grant. 
Any incentive stock option that remains unexercised more than one (1) year
following termination of employment by reason of death or disability or more
than three (3) months following termination for any reason other than
death or disability will thereafter be deemed to be a non-statutory stock
option.  Further, this Section 11.4
shall be administered in compliance with Code Section 409A and the
notices, regulations and other guidance of general applicability issued
thereunder.


 


11.5                           Additional Conditions. 
Notwithstanding anything in this Plan to the contrary:  (a) the Company may, if it shall
determine it necessary or desirable for any reason, at the time of award of any
Incentive or the issuance of any shares of Common Stock pursuant to any
Incentive, 


 


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require the recipient of the Incentive, as a condition to the receipt
thereof or to the receipt of shares of Common Stock issued pursuant thereto, to
deliver to the Company a written representation of present intention to acquire
the Incentive or the shares of Common Stock issued pursuant thereto for his or
her own account for investment and not for distribution; and (b) if at any
time the Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of any
Incentive or the shares of Common Stock issuable pursuant thereto is necessary
on any securities exchange or under any federal or state securities law, or
that the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with the award of any
Incentive, the issuance of shares of Common Stock pursuant thereto, or the
removal of any restrictions imposed on such shares, such Incentive shall not be
awarded or such shares of Common Stock shall not be issued or such restrictions
shall not be removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions unacceptable to the Company.  Notwithstanding any other provision of the
Plan or any agreements entered into pursuant to the Plan, the Company will not
be required to issue any shares of Common Stock under this Plan, and a
participant may not sell, assign, transfer or otherwise dispose of shares of
Common Stock issued pursuant to any Incentives granted under the Plan, unless
(a) there is in effect with respect to such shares a registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
and any applicable state or foreign securities laws or an exemption from such
registration under the Securities Act and applicable state or foreign
securities laws, and (b) there has been obtained any other consent,
approval or permit from any other regulatory body which the Committee, in its
sole discretion, deems necessary or advisable. 
The Company may condition such issuance, sale or transfer upon the
receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of Common Stock,
as may be deemed necessary or advisable by the Company in order to comply with
such securities law or other restrictions.


 


11.6                           Adjustment.  In the event
of any merger, consolidation or reorganization of the Company with any other
corporation or corporations, there shall be substituted for each of the shares
of Common Stock then subject to the Plan, including shares subject to
restrictions, options or achievement-of-performance share objectives, the
number and kind of shares of stock or other securities to which the holders of
the shares of Common Stock will be entitled pursuant to the transaction.  In the event of any recapitalization,
reclassification, stock dividend, stock split, combination of shares or other
similar change in the corporate structure of the Company or shares of the
Company, the exercise price of an outstanding Incentive and the number of
shares of Common Stock then subject to the Plan, including shares subject to
restrictions, options or achievements of performance shares, shall be adjusted
in proportion to the change in outstanding shares of Common Stock in order to
prevent dilution or enlargement of the rights of the participants.  In the event of any such adjustments, the
purchase price of any option, the performance objectives of any Incentive, and
the shares of Common Stock issuable pursuant to any Incentive shall be adjusted
as and to the extent appropriate, in the discretion of the Committee, to
provide participants with the same relative rights before and after such
adjustment.


 


11.7                           Incentive Plans and Agreements. 
Except in the case of stock awards, the terms of each Incentive shall be
stated in a plan or agreement approved by the Committee.  The Committee may also determine to enter into
agreements with holders of options to reclassify or convert certain outstanding
options, within the terms of the Plan, as Incentive Stock Options or as
non-statutory stock options and in order to eliminate SARs with respect to all
or part of such options and any other previously issued options.


 


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11.8                           Withholding.


 


(a)          The Company shall have the right to
(i) withhold and deduct from any payments made under the Plan or from
future wages of the participant (or from other amounts that may be due and
owing to the participant from the Company or a subsidiary of the Company), or
make other arrangements for the collection of, all legally required amounts
necessary to satisfy any and all foreign, federal, state and local withholding
and employment-related tax requirements attributable to an Incentive, or
(ii) require the participant promptly to remit the amount of such
withholding to the Company before taking any action, including issuing any
shares of Common Stock, with respect to an Incentive.  At any time when a participant is required to
pay to the Company an amount required to be withheld under applicable income
tax laws in connection with a distribution of Common Stock or upon exercise of
an option or SAR, the participant may satisfy this obligation in whole or in
part by electing (the “Election”) to have the Company withhold from the
distribution shares of Common Stock having a value up to the amount required to
be withheld.  The value of the shares to
be withheld shall be based on the Fair Market Value of the Common Stock on the
date that the amount of tax to be withheld shall be determined
(the “Tax Date”).


 


(b)         The Committee may disapprove of any
Election, may suspend or terminate the right to make Elections, or may provide
with respect to any Incentive that the right to make Elections shall not apply
to such Incentive.  An Election is
irrevocable.


 


(c)          If a participant is a Company officer or
director within the meaning of Section 16 of the Exchange Act, then an
Election is subject to the following additional restrictions:  (a) no Election shall be effective for a
Tax Date which occurs within six (6) months of the grant or exercise of
the award, except that this limitation shall not apply in the event death or
disability of the participant occurs prior to the expiration of the six-month
period; and (b) the Election must be made either six months prior to the
Tax Date or must be made during a period beginning on the third business day
following the date of release for publication of the Company’s quarterly or
annual summary statements of sales and earnings and ending on the twelfth
business day following such date.


 


11.9                           No Continued Employment, Engagement or
Right to Corporate Assets.  No participant under the Plan
shall have any right, because of his or her participation, to continue in the
employ of the Company for any period of time or to any right to continue his or
her present or any other rate of compensation. 
Nothing contained in the Plan shall be construed as giving an employee,
a consultant, such persons’ beneficiaries or any other person any equity or
interests of any kind in the assets of the Company or creating a trust of any
kind or a fiduciary relationship of any kind between the Company and any such
person.


 


11.10                     {this item DELETED}


 


11.11                     Amendment of the Plan.  The Board may
amend, suspend or discontinue the Plan at any time; provided, however, that no
amendments to the Plan will be effective without approval of the shareholders
of the Company if shareholder approval of the amendment is then required
pursuant to Section 422 of the Code or the rules of any stock
exchange or Nasdaq or similar regulatory body. 
No termination, suspension or amendment of the Plan may adversely affect
any outstanding Incentive without the consent of the affected participant; provided, however, that this sentence will not impair the
right of the Committee to take whatever action it deems appropriate under
Section 11.5 of the Plan.


 


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11.12                     Definition of Fair Market Value. 
For purposes of this Plan, the “Fair Market Value” of a share of Common
Stock at a specified date shall, unless otherwise expressly provided in this
Plan, be the amount which the Committee or the Company’s board of directors
determines in good faith in the exercise of its reasonable discretion to be one
hundred percent (100%) of the fair market value of such a share as of the date
in question; provided, however, that
notwithstanding the foregoing, if such shares are listed on a U.S. securities
exchange or are quoted on the Nasdaq National Market System, Nasdaq SmallCap
Stock Market (“Nasdaq”), or the Over-The-Counter Bulletin Board (“OTCBB”), then
Fair Market Value shall be determined by reference to the last sale price of a
share of Common Stock on such U.S. securities exchange or Nasdaq, or the
average of the bid and ask price on the OTCBB, on the applicable date.  If such U.S. securities exchange or Nasdaq is
closed for trading on such date, or if the Common Stock does not trade on such
date, then the last sale price used shall be the one on the date the Common
Stock last traded on such U.S. securities exchange or Nasdaq.


 


11.13                     Breach of Confidentiality, Assignment of Inventions,
or Non-Compete Agreements.  Notwithstanding anything in
the Plan to the contrary, in the event that a participant materially breaches
the terms of any confidentiality, assignment-of-inventions, or noncompete
agreement entered into with the Company or any parent or subsidiary of the
Company, whether such breach occurs before or after termination of such
participant’s employment or other service with the Company or any subsidiary,
the Committee in its sole discretion may immediately terminate all rights of
the participant under the Plan and any agreements evidencing an Incentive then
held by the participant without notice of any kind.


 


11.14                     Governing Law.  The validity,
construction, interpretation, administration and effect of the Plan and any
rules, regulations and actions relating to the Plan will be governed by and
construed exclusively in accordance with the laws of the State of [Minnesota],
notwithstanding the conflicts-of-law principles of Minnesota or any other
jurisdiction.


 


11.15                     Successors and Assigns.  The Plan will
be binding upon and inure to the benefit of the successors and permitted
assigns of the Company and the participants in the Plan.


 


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