TABLE OF CONTENTS




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EXHIBIT 10.20

EMPLOYMENT AGREEMENT
BETWEEN JAMES S. MURPHY AND
HYPERTENSION DIAGNOSTICS, INC.

THIS AGREEMENT is entered into as of July 1, 1999, by and between
Hypertension Diagnostics, Inc., a Minnesota corporation (the Company), and
James S. Murphy (Executive).

WHEREAS, the Company wishes to retain Executive to render services for the
Company on the terms and conditions set forth in this Agreement, and Executive
wishes to be retained and employed by the Company on such terms and conditions;

WHEREAS, the Company desires to engage Executive in a position of trust
and confidence to aid the Company in connection with the Companys business;

WHEREAS, the Company and Executive desire to set forth in writing the
terms and conditions with respect to employment, remuneration and the right,
title and interest of the Company in proprietary information or inventions
produced during Executives employment with the Company and assignment of
proprietary information or inventions produced while employed with the Company;

WHEREAS, the Company desires to enter into a covenant not to compete with
Executive so as to protect the business and goodwill of the Company from
competition;

WHEREAS, Employees increase in salary is consideration for this
Agreement;

NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and Executive set forth below, and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the Company and
Executive agree as follows:

1. Employment. Upon the other terms and conditions set forth in this
Agreement, the Company hereby employs Executive, and Executive accepts such
employment, as its Vice President of Finance, Chief Financial Officer and Human
Resources Manager. Except as expressly provided herein, termination of this
Agreement by either party shall also terminate Executives employment by the
Company.

2. Term. Subject to Executives full compliance with Section 3 hereof and
subject to the provisions of Sections 8 and 10 hereof, Executives employment
shall commence as of the date hereof and continue through June 30, 2001. This
Agreement may be extended beyond June 30, 2001 by mutual agreement of the
parties.





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3. Position and Duties.



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| | 3.01 Service with Company. During the term of this Agreement, Executive
agrees to perform such reasonable employment duties as the Company shall assign
to Executive from time to time. In furtherance thereof, Executive shall report
to the Chief Executive Officer (CEO). In addition, the Executive shall perform
such other duties of a senior executive nature as the CEO and the Executive
from time to time determine to be mutually acceptable. Executive accepts such
employment on the terms and conditions set forth in this Agreement.                                                         
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| | 3.02 Performance of Duties. Executive agrees to serve the Company
faithfully and to the best of his ability and to devote his full time,
attention and best efforts to the business and affairs of the Company during
the term of this Agreement. Executive represents to the Company that he has no
contractual commitments inconsistent with his obligations set forth in this
Agreement, and that during the term of this Agreement, he will not render or
perform services for any other corporation, firm, entity, organization or
person which are inconsistent with the provisions of this Agreement.

4. Compensation.



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| | 4.01 Base Salary. As compensation for all services to be rendered by
Executive under this Agreement during the full term of this Agreement, the
Company shall pay to Executive a minimum base Salary (Base Salary shall mean
regular cash compensation paid on a periodic basis exclusive of benefits,
bonuses or incentive payments) at the annual rate of $128,000, payable
bi-weekly. On or before July 1 of each year during the term of this Agreement,
Executive will receive a performance evaluation and the Base Salary shall be
subject to increase at the discretion of the Company. If the Executives Base
Salary is increased during the term of this Agreement, the increased amount
shall be the new Base Salary until subsequently adjusted by the Company, if at
all.                                                                                        
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| | 4.02 Bonus and Incentive. Executive shall be eligible to participate in
the Companys executive incentive bonus plans and shall be eligible to receive
grants or awards pursuant to the Companys stock option plans, all in
accordance with the terms and conditions of those plans and on a basis
consistent with that customarily provided for senior officers at the highest
level of the Company. Each year during the term of this Agreement, Executive
shall be eligible for an annual payment under the Companys executive incentive
bonus plan of up to twenty-five percent (25%) of his then-current minimum base
annual salary. Each year Executive also shall be eligible to receive stock
options to purchase shares of the Companys Common Stock according to the terms
of the Companys stock option plan as determined by the Companys Compensation
Committee.
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| | 4.03 Fringe Benefits. In addition to the compensation payable to
Executive as provided in Sections 4.01 and 4.02 above:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



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| | (a) Automobile. The Company shall reimburse Executive for all
Company related mileage at the then current rate allowed by the
Internal Revenue

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| | Service. Executive shall receive no automobile
allowance.



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| | (b) Paid Time Off (PTO). During the term of the Agreement,
Executive shall be entitled to paid time off in accordance with the
Companys Paid Time Off (PTO) Plan as specified in Exhibit A,
attached hereto and made a part hereof. In addition, Executive
shall be entitled to carryover all accrued but unused vacation
earned with the Company prior to May 3, 1999, in accordance with
the terms of Executives Employment Agreement dated July 1, 1997.
The Companys PTO Plan became effective on May 3, 1999. This
previously earned but unused vacation shall not be considered in
calculating maximum limitations on yearly PTO carryover under the
present PTO plan or any other PTO plan enacted by the Company.
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| | (c) Holidays. The Company shall provide eight paid holidays
and two paid personal holidays per calendar year consistent with
the Companys Holiday Policy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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| | (d) Other Benefits. Executive shall be entitled to
participate in all employee benefit plans or programs of the
Company to the extent that Executives position, title, tenure,
salary, age, health and other qualifications make Executive
eligible to participate. The Company does not guarantee the
adoption or continuance of any particular employee benefit plan or
program during the term of this agreement, and Executives
participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto.                                                                                                                                                                   



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| | 4.04 Stock Options. The Company may at its discretion grant Employee
incentive stock options or nonqualified stock options of the Companys $.01 par
value Common Stock, pursuant to the terms and conditions set forth in the
respective stock option agreements.                                        
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| | 4.05 Business Expenses. The Company will pay or reimburse Executive for
all reasonable and necessary out-of-pocket expenses incurred by Executive in
the performance of Executives duties under this Agreement subject to
compliance by Executive with the Companys policies for expense reimbursements.

5. Confidential Information.



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| | 5.01 Confidential Information Defined. Confidential Information means
information not generally known, and proprietary to the Company or to a third
party for whom the Company is performing work, including, without limitation,
information concerning any patents or trade secrets, confidential or secret
designs, processes, formulae, source codes, plans, devices or material (whether
or not patented or patentable) directly or indirectly useful in any aspect of
the business of the Company, any customer or supplier lists of the Company, any
confidential secret development or research work of the Company, or any other
confidential information or secret aspects of the business of the Company. All
information which Executive acquires or becomes acquainted with during the
period of his employment by the Company (including employment by an affiliated
company), whether developed by Executive or by others,

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| | which he has reasonable
basis to believe to be Confidential Information, or which is treated by the
Company as being Confidential Information, shall be presumed to be Confidential
Information.



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| | 5.02 Obligations of Executive. Except as permitted or directed by the
Company, Executive shall not, either during his employment by the Company or
thereafter, divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of the business of the Company) any
Confidential Information. Executive acknowledges that the Confidential
Information constitutes a unique and valuable asset of the Company and
represents a substantial investment of time and expense by the Company and its
predecessors, and that any disclosure or other use of such Confidential
Information other than for the sole benefit of the Company would be wrongful
and would cause irreparable harm to the Company. Both during and after the
term of this Agreement, Executive will refrain from any acts or omissions that
would reduce the value of such knowledge or information to the Company.
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| | 5.03 Scope of Obligation. The foregoing obligations of confidentiality
shall not apply to any knowledge or information which is now published or which
subsequently becomes generally publicly known in the form in which it was
obtained from the Company, other than as a direct or indirect result of the
breach of this Agreement by Executive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

6. Ventures. If, during the term of this Agreement, Executive is engaged
in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties, all rights in such
project, program or venture shall belong to the Company. Except as formally
approved by the Company, Executive shall not be entitled to any interest in
such project, program or venture or to any commission, finders fee or other
compensation in connection therewith other than the salary to be paid to
Executive as provided in this Agreement.

7. Patent and Related Matters.



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| | 7.01 Disclosure and Assignment. Executive will promptly disclose in
writing to the Company complete information concerning each and every
invention, discovery, improvement, device, design, apparatus, practice,
process, method or product, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by Executive,
whether or not during regular working hours, either solely or in collaboration
with others, during the term of this Agreement, or the twelve months
thereafter, relating either directly or indirectly to the business, products,
practices or techniques of the Company (hereinafter referred to as
Developments). Executive, to the extent that he has the legal right to do
so, hereby acknowledges that any and all of said Developments are the property
of the Company and hereby assigns and agrees to assign to the Company any and
all of Executives right, title and interest in and to any and all of such
Developments.
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| | 7.02 Future Developments. As to any future Developments made by Executive
which relate to the business, products or practices of the Company, and which
are first conceived or reduced to practice during the term of this Agreement,
or within twelve (12) months thereafter, but which Executive claimed for any
reason to belong to an entity or person other than the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| | Company, Executive will
promptly disclose the same in writing to the Company and shall not disclose the
same to others if the Company, within twenty (20) days thereafter, shall claim
ownership of such Developments under the terms of this Agreement. If the
Company makes no such claim, Company shall not be obligated to maintain in
confidence any such information disclosed by Executive.



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| | 7.03 Limitation on Section 7.01 and 7. 02. The provisions of Sections
7.01 and 7.02 shall not apply to any Development meeting the following
conditions:



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| | (a) such Development was developed entirely on Executives own
time; and                                                                                                                   
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| | (b) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information, and
without use of any Company personnel; and                      
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| | (c) such Development does not relate (i) directly to the
business of the Company, or (ii) to the Companys actual or
demonstrably anticipated future business, research or development;
and
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| | (d) such Development does not result, directly or indirectly,
from any work performed by Executive for the Company.                                                                        



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| | 7.04 Assistance of Executive. Upon request and without further
compensation
therefor, but at no expense to Executive, and whether during the term of this
Agreement or thereafter, Executive will do all lawful acts, including, but not
limited to, the execution of papers and lawful oaths and the giving of
testimony, that in the opinion of the Company, its successors and assigns, may
be necessary or desirable in obtaining, sustaining, reissuing, extending and
enforcing United States and foreign patents, including, but not limited to,
design patents, on any and all of such Developments, and for perfecting,
affirming and recording the Companys complete ownership and title thereto, and
to cooperate otherwise in all proceedings and matters relating thereto.
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| | 7.05 Records. Executive will keep complete, accurate and authentic
accounts, notes, data and records of all Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, Executive will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, Executive will surrender the same, and all copies thereof, to the
Company upon the conclusion of Executives employment.                                                                                                                                                                                                                                                                    

8. Termination.



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| | 8.01 Grounds for Termination. This Agreement shall terminate prior to the
expiration of the initial term set forth in Section 2 or any extension thereof
in the event that any time during such initial term or any extension thereof:

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| | (a) Executive dies, or                                                                                                   
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| | (b) Executive becomes disabled (as defined below), so that he
cannot perform the essential functions of his position, or 
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| | (c) The Company elects to terminate this Agreement for Cause
and notifies Executive in writing of such election, or    
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| | (d) The Company elects to terminate this Agreement without
Cause and notifies Executive in writing of such election, or
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| | (e) Executive elects to terminate this Agreement and notifies
the Company in writing of such election.                   



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| | If this Agreement is terminated pursuant to subsection (a), (b) or (c) of this
Section 8.01, such termination shall be effective immediately provided,
however, a termination pursuant to subsection 8.01(c) shall include the notice
and right to cure referenced, and related to, a termination for Cause described
in subsection 8.02(a). If this Agreement is terminated pursuant to subsection
(d) or (e) of this Section 8.01, such termination shall be effective on the
date set forth in the notice of termination.



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| | 8.02 Cause Defined.



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| | (a) Executive has breached the provisions of this Agreement in
any material respect (provided, that the Company gives written
notice of its intention to terminate Executives employment for
Cause, and such notice shall state in reasonable detail the
particular act(s) or failure(s) to act that constitute grounds on
which the termination is based, and, provided that Executive shall
have ten (10) business days to cure any such breach), or
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| | (b) Executive has engaged in material misconduct, including,
without limitation, willful and material failure to perform
Executives duties as an officer or employee of the Company, or                                                                                                                                                                                                                                                               
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| | (c) Executive has committed fraud, misappropriation or
embezzlement in connection with the Companys business, or                                                                                                                                                                                                                                                                                                                                      
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| | (d) Executive has been convicted or has pleaded nolo
contendereto criminal misconduct (except for parking violations,
minor traffic violations, and other petty or insignificant
misdemeanors, or other misconduct which does not relate to or
involve or adversely affect Executives duties for the Company, as
reasonably determined by the Company Board of Directors).                                                                           



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| | 8.03 Disability Defined. As used in this Agreement, the term
disability means any mental or physical condition that renders Executive
unable to perform the essential functions of his position, with or without
reasonable accommodation, as defined by various state

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| | and federal disability
laws. Executive shall be presumed to have such a disability, for the purpose
of this Agreement, in the event Executive qualifies, because of illness or
incapacity, to begin receiving disability income insurance payments under any
long-term disability income insurance policy that the Company maintains for the
benefit of Executive. If there is no such policy in effect at the date of
Executives illness or incapacity, Executive shall be presumed to have such a
disability for the purpose of this Agreement if Executive is substantially
incapable of performing his duties for a period of more than eight (8) weeks,
after also including any available paid time off (PTO) days, if any, as may
be adopted for employees of the Company (and as referenced in Section 4.03(b));
provided, however, at least thirty (30) days prior to the end of such period
referenced in this sentence, the Company shall notify Executive in writing of
its determination that, with the passage of requisite balance of time
remaining, Executive shall be deemed to be disabled; provided, further, during
such thirty (30) day period, Executive shall be permitted to make a
presentation to the Board of Directors, or a committee of the Board of
Directors constituted for such presentation, for its consideration with respect
to a finding of Disability on the part of Executive.



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| | 8.04 Effect of Termination. Notwithstanding any termination of this
Agreement, Executive, in consideration of his employment hereunder to the date
of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to periods, activities or obligations upon or
subsequent to the termination of Executives employment.                                                                                                                                                                                                                                                                                                                                                                                                                     
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| | 8.05 Surrender of Records and Property. Upon termination of his
employment with the Company, Executive shall deliver or shall cause to be
delivered promptly to the Company all copies of all records, manuals, books,
blank forms, documents, letters, memoranda, notes, notebooks, reports, data,
tables, calculations or copies thereof, which are the property of the Company
or which relate in any way to the business products, practices or techniques of
the Company, and all other property, trade secrets and confidential information
of the Company, including, but not limited to, all documents which in whole or
in part contain any trade secrets or confidential information of the Company,
which in any of the cases are in his possession or under his control.

9. Remedies for Early Termination. In the event of Termination pursuant
to Section 8, Base Salary shall be paid as follows:



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| | 9.01 In the event of termination for Cause (Section 8.01(c)), Base Salary
shall continue to be paid on a bi-weekly basis prorated through the date of
termination specified in any notice of termination.                                                                                                                                                                                                                                                                                                                                               
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| | 9.02 In the event of termination pursuant to Section 8.01(e), compensation
shall continue to be paid as follows: if the notice of termination is given by
Executive at any time, Base Salary shall continue to be paid on a bi-weekly
basis prorated through the date of termination specified in such notice (not to
exceed two weeks pay or such greater period as determined in the sole
discretion of the Company) and thereafter Executive shall be entitled to such
benefits accrued as of the date of termination to the extent required by law.

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| | 9.03 In the event of termination of this Agreement by reason of
Executives death (Section 8.01(a)), the Executives designated beneficiary or,
in the absence of such designation, the Executives estate shall be entitled to
benefits, if any, payable under any life insurance program maintained by the
Company.                                                                                                 
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| | 9.04 In the event of disability (Section 8.01(b)), the Company shall
continue to pay Base Salary to the Executive until the earlier of such time as
the Executive is determined to be eligible for long-term disability benefits,
if any, under any disability benefit plan of the Company then in effect, or the
end of the sixth (6th) month following the month in which the event causing the
disability occurred.
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| | 9.05 In the event of termination without Cause pursuant to Section
8.01(d), compensation shall continue to be paid as follows:                                                                                                                                                                                                                                                                                        



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| | (a) Executive shall be entitled to the balance of Base Salary
due from the date of termination until the earlier of the end of
twelve (12) months thereafter or the end of the term of this
agreement set forth in Section 2. Such Base Salary shall continue
to be paid on a bi-weekly basis prorated through the end of the
applicable payment period referenced immediately above; and
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| | (b) Executive shall be entitled to such benefits accrued as of
the date of termination to the extent required by law.                                                                                                                                                                                                                                                                    

10. Change in Control. It is expressly recognized by the parties that a
Change in Control would necessarily result in material alteration or
diminishment of Executives position and responsibilities. Therefore, if
during the term of this Agreement, there shall occur, with or without the
consent of the Company, a Change in Control, the Company and Executive agree to
abide by the terms and conditions set forth in the Change in Control Severance
Agreement attached hereto as Exhibit B  and made a part hereof. Any severance
payable pursuant to the Change in Control Severance Agreement shall be in lieu
of, and not in addition to, any payments provided for in this Agreement, and,
except to the extent modified or superceded by the Change in Control Severance
Agreement, the provisions of this Agreement shall continue to apply following a
Change in Control.

11. Covenant Not to Compete.



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| | 11.01 In consideration for Executives increase in Salary and the Change
in Control Severance Agreement, Executive expressly acknowledges that Executive
is entering into this covenant not to compete so as to protect the business and
goodwill of the Company from competition in the event of a termination of the
employment relationship and Executive further acknowledges the reasonableness
of the restriction imposed herein. Accordingly, in the event that Executives
employment with the Company is terminated voluntarily by the Executive or by
the Company for Cause as defined in Section 8.02, it is agreed that:



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| | (a) Executive will inform any new employer, before accepting
employment, of the existence of this Agreement and give such a copy
of this

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| | Section 11, Covenant Not to Compete; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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| | (b) Executive will not, for a period beginning from the date
of this Agreement and for twelve (12) months after Executives
employment with the Company ends, sell to, solicit, serve, or
attempt to sell to, solicit, or serve any customer, client or
account or any prospective customer, client or account of the
Company, provided, however, that the foregoing limitation shall
only apply to sales, solicitations, services or attempts to do any
of the foregoing which involve a Competing Product. A customer,
client or account is any person, firm or entity to whom or to
which the Company furnished any services, materials, or products at
any time during Executives employment with the Company. A
prospective customer, client or account is one which, during
Executives employment with the Company, is solicited, successfully
or unsuccessfully, to become a customer, client or account of the
Company. As used herein, a Competing Product is a product
similar to or in competition with any product, or planned product,
of the Company as of the date Executives employment is terminated.
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| | (c) Executive will not, from a period beginning with the date
of this Agreement and for twelve (12) months after Executives
employment with the Company ends, cause or attempt to cause any
customer, client or account or any prospective customer, client or
account, to divert, terminate, limit or in any manner modify or
fail to enter into any actual or potential business relationship
with the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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| | (d) Executive will not, for a period beginning with the date
of this Agreement and for twelve (12) months after Executives
employment with the Company ends, divert, solicit, or employ, or
attempt to divert, solicit, or employ any employees of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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| | (e) Executive shall not, directly or indirectly, from a period
beginning from the date of this Agreement and for twelve (12)
months after Executives employment with the Company ends, engage
in competition with the Company in any manner or capacity (e.g., as
an advisor, principal, agent, partner, officer, director,
stockholder, employee, member of any association, or otherwise) for
a competitor of the Company. The obligations of Executive under
Section 11.01(e) shall apply to any geographic area in which the
Company: (i) has engaged in business during the term of this
Agreement through production, promotional, sales or marketing
activity, or otherwise, (ii) has otherwise established the
Companys goodwill, business reputation or any customer or supplier
relations, or (iii) has been directly involved in the expansion of
the Companys business and development of the Companys customer
base.                                                                                                                                                                                          

12. Settlement of Disputes.



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| | 12.01 Resolution of Certain Claims  Injunctive Relief. Executive agrees
that, in addition to, but not to the exclusion of any other available remedy,
the Company shall have the

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| | right to enforce the provisions of Section 7 and 11
by applying for and obtaining temporary and permanent restraining orders or
injunctions from a court of competent jurisdiction (the jurisdiction of which
is consented to in Section 12.02 without the necessity of filing a bond
therefor. The prevailing party in any such action shall be entitled to recover
from the other party reasonable attorneys fees and costs incurred by the
prevailing party in such action.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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| | 12.02 Venue. Any action at law, suit in equity, or judicial proceeding
arising directly, indirectly, or otherwise in connection with, out of, related
to or from this Agreement or any provision hereof, shall be litigated only in
the courts of the State of Minnesota, County of Dakota, or the Federal District
Court, District of Minnesota, Fourth Division. Executive waives any right
Executive may have to transfer or change the venue of any litigation brought
against Executive by the Company. Executive also waives any claim of
inconvenient forum.                                                                                                                                                                                                                                                                                                                                                                                                                 
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| | 12.03 Severability. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business
activities covered by, any provision of this Agreement be in excess of that
which is valid and enforceable under applicable law, then such provision shall
be construed to cover only that duration, geographical extent or business
activities which may be valid and enforceable under applicable law. Executive
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction that renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms possible under applicable law.)

13. Miscellaneous.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 13.01 Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the laws of the State of Minnesota other
than its law dealing with conflicts of law.                                                                                                                                                                                                                                         
|
| | 13.02 Prior Agreements. This Agreement contains the entire agreement of
the parties relating to the employment of Executive by the Company and the
ancillary matters discussed herein and supersedes all prior agreements and
understandings with respect to such matters, and the parties hereto have made
no agreements, representations or warranties relating to such employment or
ancillary matters which are not set forth within.
|
| | 13.03 Withholding Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as shall
be required pursuant to any law or governmental regulation or ruling.                                                                                                                                                                                                                  
|
| | 13.04 Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the both Executive and
the Company.                                                                                                                                                                                                                                                                      
|
| | 13.05 No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be by any estoppel to enforce any
provision of this Agreement,                                                                                                                                                                                                                                                              

10



---





| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any
written waiver shall not be deemed a continuing waiver unless specifically
stated, shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or as to
any act other than that specifically waived.
|
| | 13.06 Assignment. This Agreement shall not be assignable, in whole or in
part, by Executive without the written consent of the Company.                                                                                                                                                                                                                                                                  
|
| | 13.07 Notices. All notices, requests and demands given to or made
pursuant hereto shall, except as otherwise specified herein, be in writing and
be delivered, mailed or faxed to any such party at its address or fax number
which:                                                                                                                                                                     



| |                                     
| | ------------------------------------
| | In the case of the Company shall be:



| |                               
| | ------------------------------
| | Hypertension Diagnostics, Inc.
| | 2915 Waters Road, Suite 108   
| | Eagan, Minnesota 55121-1562   
| | FAX NO.: (651) 687-0485       



| |                                       
| | --------------------------------------
| | If the case of the Executive shall be:



| |                       
| | ----------------------
| | James S. Murphy       
| | 8670 Black Maple Drive
| | Eden Prairie, MN 55344



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Either party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or certified
mail, shall be deemed dispatched on the registered date or that stamped on the
certified mail receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is sooner. Any
notice that is delivered via telefax shall be deemed dispatched when it is
actually sent, and shall be deemed received when it is actually received.
|
| | 13.08 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.                                                                                                                                                                                                                                                                                                                                                        
|
| | 13.09 Time of the Essence. Time is of the essence in the performance of
the obligations hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | 13.10 Captions and Headings. The captions and paragraph headings used in
this Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.                                                                                                                                                                                                                                                                                                          

11



---



IN WITNESS WHEREOF, Executive and the Company have executed this Agreement
as of the date set forth in the first paragraph.

|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|HYPERTENSION DIAGNOSTICS, INC                                                                           
|                                                                                                        
|By: /s/ Dennis L. Sellke
_____________________________
Dennis L. Sellke
Chief Executive OfficerCompany
|                                                                                                        
|/s/ James S. Murphy
______________________________
James S. MurphyExecutive                           

Dated: December 22, 1999

12



---



Exhibit A

Paid Time Off (PTO) Plan
James S. Murphy

The purpose of the Companys Paid Time Off (PTO) policy is to allow employees
paid time away from work (PTO time) for vacation, recuperation from illnesses
and to conduct personal business. Under this policy, these reasons for being
absent from work have been grouped together. Benefits for the Executive will
accrue as follows:

|           |  |            |               |           |  |                |       |               |  |           |           |  |  |  |         |     |  |  |            |  
|---------- |  | ---------- | ------------- | --------- |  | -------------- | ----- | ------------- |  | --------- | --------- |  |  |  | ------- | --- |  |  | ---------- | -
|Number of 
|Years     
|Employment |  |            |               |           |  | PTO Accrual    |       |               |  |           |           |  |  |  |         | PTO
|At the     |  | Period of  |               | Hours per |  | PTO Accrual    |       | PTO Work      |  | Carryover
|Company    |  | Employment |               | Week      |  | Hours per Year |       | Days per Year |  | Maximum  
|           |  |            |               |           |  |                |       |               |  |          
|4th Year   |  |            | July 1, 1999  |           |  |                | 4.000 |               |  |           | 208 Hours |  |  |  | 26 Days |     |  |  | 41 Days    |  
|          
|          
|          
|          
|           |  |            | Through       |           |  |                |       |               |  |           |           |  |  |  |         |     |  |  | (328 Hours | )
|          
|          
|          
|          
|           |  |            | June 30, 2000 |          
|          
|          
|          
|          
|5th Year   |  |            | July 1, 2000  |           |  |                | 4.000 |               |  |           | 208 Hours |  |  |  | 26 Days |     |  |  | 41 Days    |  
|          
|          
|          
|          
|           |  |            | Through       |           |  |                |       |               |  |           |           |  |  |  |         |     |  |  | (328 Hours | )
|          
|          
|          
|          
|           |  |            | June 30, 2001 |          

If the carryover maximum is reached, PTO time accrual will be suspended until
the Executive uses PTO benefits, at which time the accrual will resume.

Upon termination of employment, the Executive shall be paid for all such
accrued but unused PTO time at the Executives then current Base Salary rate.





---



EXHIBIT B

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT is made and entered into by and between Hypertension
Diagnostics, Inc., a Minnesota corporation with its principal offices at 2915
Waters Road, Suite 108, Eagan, Minnesota 55121-1562 (HDI) and James S.
Murphy, residing at 8670 Black Maple Drive, Eden Prairie, MN 55344 (the
Executive), and shall be effective as of the 1st day of July, 1999.

WHEREAS, HDI considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of HDI and its shareholders; and

WHEREAS, the Executive has made and is expected to make, due to
Executives intimate knowledge of the business and affairs of HDI, its
policies, methods, personnel, and problems, a significant contribution to the
profitability, growth, and financial strength of HDI; and

WHEREAS, HDI, as a publicly held corporation, recognizes that the
possibility of a Change in Control may exist, and that such possibility and the
uncertainty and questions which it may raise among management may result in the
departure or distraction of the Executive in the performance of the Executives
duties, to the detriment of HDI and its shareholders; and

WHEREAS, it is in the best interests of HDI and its shareholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Executive, to their assigned duties without distraction
and to ensure the continued availability to HDI of the Executive in the event
of a Change in Control.

THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:

1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through June 30, 2001, unless further extended by
action of the Board of Directors of the Company (the Board); provided,
however, that if a Change in Control shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of 24 months from the date of the occurrence of a Change in Control. In
the event that more than one Change in Control shall occur during the original
or extended term of this Agreement, the 24- month period shall follow the last
Change in Control. This Agreement shall neither impose nor confer any further
rights or obligations on HDI or the Executive on the day after the end of the
term of this Agreement. Expiration of the term of this Agreement of itself and
without subsequent action by HDI or Executive shall not end the employment
relationship between HDI and Executive.



---



Notwithstanding the foregoing, the Board may terminate this Agreement only
if the Board determines based upon a written opinion from HDIs independent
auditors or tax counsel, that: (a) but for this Agreement (individually or
together with other similar arrangements), pooling of interest accounting
would apply to a contemplated transaction that would constitute a Change in
Control, and (b) such accounting treatment is an essential condition to the
consummation of such transaction.

2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control and the Executives employment is
terminated. For purposes of this Agreement, a Change in Control of HDI shall
mean a change in control which would be required to be reported in response to
item 6(e) on Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the Exchange Act), whether or not HDI is
then subject to such reporting requirement, including, without limitation, if:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Any person (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than HDI or a trustee or other fiduciary
holding securities under any employee benefit plan sponsored and
maintained by HDI, becomes a beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of HDI
representing 30% or more of the combined voting power of HDIs then
outstanding securities and is required to file a Schedule 13D under the
Exchange Act; or



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) The Incumbent Directors cease for any reason to constitute at
least a majority of the Board. The term, Incumbent Directors, shall
mean those individuals who are members of the Board on the effective date
of this Agreement and any individual who subsequently becomes a member of
the Board and whose election or nomination for election by HDIs
shareholders was approved by a vote of at least a majority of the then
Incumbent Directors; or



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) (i) HDI consummates a merger, consolidation, share exchange or
other reorganization of HDI with any corporation or entity, other than an
entity owned at least 80% by HDI, unless the shareholders of HDI
immediately prior to such transaction beneficially own, directly or
indirectly, 51% or more of the combined voting power of the resulting
entitys outstanding voting securities as well as 51% or more of the
total market value of the resulting entitys outstanding equity
securities immediately after such transaction; (ii) HDI consummates a
division of HDI, unless the shareholders of HDI immediately prior to such
division beneficially own, directly or indirectly, 51% or more of the
combined voting power of the outstanding voting securities as well as 51%
or more of the total market value of each such entitys outstanding
equity securities of each entity resulting from the division, and in
substantially the same proportion as such shareholders owned shares of
HDI prior to such division; or (iii) the shareholders of HDI approve an
agreement for the sale or disposition (in one transaction or a series of
transactions) of assets of HDI, the total consideration of which is
greater than 51% of the market value of all of the outstanding equity
securities of HDI, , and the Board determines in good faith

2



---





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | that the
total consideration for any transaction described in subsection (c)(i)
through (iii) represents an amount in excess of the liquidation value of
HDI.

3. Termination Following Change in Control. If a Change in Control shall
have occurred and the Executives employment is terminated during the term of
this Agreement, Executive shall be entitled to the benefits provided in
subsection 4(d) unless such termination is (A) because of Executives death or
Retirement, (B) by HDI for Cause or Disability, or (C) by Executive other than
for Good Reason.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Disability; Retirement. If, as a result of incapacity due to
physical or mental illness, the Executive shall have been absent from the
full-time performance of Executives duties with HDI for six consecutive
months, and within 30 days after written Notice of Termination is given
the Executive shall not have returned to the full-time performance of the
Executives duties, HDI may terminate Executives employment for
Disability. Any question as to the existence of Executives Disability
upon which Executive and HDI cannot agree shall be determined by a
qualified independent physician selected by Executive (or, if the
Executive is unable to make such selection, it shall be made by any adult
member of the Executives immediate family), and approved by HDI. The
determination of such physician made in writing to HDI and to Executive
shall be final and conclusive for all purposes of this Agreement.
Termination by HDI or Executive of Executives employment based on
Retirement shall mean termination on or after attaining age 65.
|
| | (b) Cause. For purposes of this Agreement, Cause shall mean:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) Executive has breached the provisions of this Agreement in
any material respect (provided, that HDI gives written notice of
its intention to terminate Executives employment for Cause, and
such notice shall state in reasonable detail the particular act(s)
or failure(s) to act that constitute grounds on which the
termination is based, and, provided that Executive shall have ten
(10) business days to cure any such breach), or



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) Executive has engaged in material misconduct, including,
without limitation, willful and material failure to perform
Executives duties as an officer or employee of HDI, or



| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | (iii) Executive has committed fraud, misappropriation or
embezzlement in connection with HDIs business, or



| |                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iv) Executive has been convicted or has pleaded nolo
contendereto criminal misconduct (except for parking violations,
minor traffic violations, and other petty or insignificant
misdemeanors, or other misconduct which does not relate to or
involve or adversely affect Executives duties for HDI, as
reasonably determined by HDIs Board).

3



---





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Executive shall not be terminated for Cause unless and until HDI shall
have delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose
and, except for the reasons set forth in (iii) above, after reasonable
notice to Executive and an opportunity for Executive, together with
Executives counsel, to be heard before the Board, finding that, in the
good faith opinion of the Board, Executives conduct was Cause and
specifying the particulars thereof in detail.



| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) Good Reason. Executive shall be entitled to terminate his
employment for Good Reason. For purposes of this Agreement, Good
Reason shall mean, without Executives express written consent, any of
the following:



| |                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) The assignment to Executive of any duties inconsistent
with Executives status or position with HDI, or a substantial
reduction in the nature or status of Executives responsibilities
from those in effect immediately prior to the Change in Control;



| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | (ii) a reduction by HDI in Executives annual compensation in
effect immediately prior to a Change in Control;



| |                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) the relocation of HDIs principal executive offices to a
location more than fifty miles from Eagan, Minnesota or HDI
requiring Executive to be based anywhere other than HDIs principal
executive offices except for required travel on HDIs business to
an extent substantially consistent with Executives business travel
obligations immediately prior to the Change in Control;



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iv) the failure by HDI to continue to provide Executive with
benefits at least as favorable to those enjoyed by Executive under
any of HDIs pension, profit sharing, life insurance, medical,
health and accident, disability, deferred compensation, incentive
awards, incentive or nonqualified stock options, or savings plans
in which Executive was participating immediately prior to the
Change in Control, the taking of any action by HDI which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed
immediately prior to the Change in Control, or the failure by HDI
to provide Executive with the number of paid vacation days to which
Executive is entitled immediately prior to the Change in Control;
provided, however, that HDI may amend any such plan or programs as
long as such amendment applies to all senior executive officers of
HDI and does not reduce any benefits to which Executive would be
entitled by an amount, in the aggregate, in excess of 10%;

4



---





| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (v) the failure of HDI to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 7; or



| |                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (vi) any other material breach of this Agreement, including
but not limited to, any purported termination of Executives
employment which is not made pursuant to a Notice of Termination
satisfying the requirements of subsection (d) below; for purposes
of this Agreement, no such purported termination shall be
effective.



| |                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Subsection 3(c)(i),(ii),(iii),(iv) and (vi) shall not constitute Good
Reason unless HDI shall have received written notice from Executive that
sets forth in detail the manner in which HDI has breached this Agreement
and HDI is afforded an additional number of days sufficient to cure such
breach in a diligent manner.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) Notice of Termination. Any purported termination of Executives
employment by HDI or by Executive shall be communicated by written Notice
of Termination to the other party hereto in accordance with Section 8.
For purposes of this Agreement, a Notice of Termination shall mean a
notice, which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth the facts and circumstances,
claimed to provide a basis for termination of Executives employment.



| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | (e) Date of Termination. For purposes of this Agreement, Date of
Termination shall mean:



| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) If Executives employment is terminated for Disability, 30
days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of
the Executives duties during such 30 day period); and



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) If Executives employment is terminated pursuant to
subsections (b) or (c) above or for any other reason (other than
Disability), the date specified in the Notice of Termination
(which, in the case of a termination pursuant to subsection (b)
above shall not be less than 10 days, and in the case of a
termination pursuant to subsection (c) above shall not be less than
10 nor more than 30 days, respectively, from the date such Notice
of Termination is given).

4. Compensation Upon Termination or During Disability. Following a Change
in Control of HDI, as defined in Section 2, upon termination of Executives
employment or during a period of Disability, Executive shall be entitled to the
following benefits:



| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) During any period that Executive fails to perform full-time
duties with HDI as a result of a Disability, HDI shall pay Executive, the
Executives base salary as in effect at the commencement of any such
period and any other form or type of

5



---





| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | compensation otherwise payable for
such period as if the Executive were not so disabled, until such time as
the Executive is determined to be eligible for long term disability
benefits, if any, under any HDIs insurance programs then in effect.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) If Executives employment shall be terminated (A) by HDI for
Cause, Executives death, Disability or (B) Retirement by Executive other
than for Good Reason, HDI shall pay to Executive his full base salary
through the Date of Termination at the rate in effect at the time Notice
of Termination is given and HDI shall have no further obligation to
Executive under this Agreement, except as provided in Section 4(c) below.



| |                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) If Executives employment shall be terminated by HDI or by
Executive, HDI shall immediately commence payment to the Executive (or
Executives designated beneficiaries or estate, if no beneficiary is
designated) of any and all benefits to which the Executive is entitled
under HDIs retirement and insurance programs then in effect or as
otherwise required by law.



| |                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) If Executives employment shall be terminated (A) by HDI other
than for Cause, Executives death, Disability or Retirement or (B) by
Executive for Good Reason, then Executive shall be entitled to the
benefits provided below:



| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) HDI shall pay Executive, through the Date of Termination,
the Executives base salary as in effect at the time the Notice of
Termination is given and any other form or type of compensation
otherwise payable for such period;



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) In lieu of any further salary payments for periods
subsequent to the Date of Termination, HDI shall pay a severance
payment (the Severance Payment) equal to the Executives Monthly
Compensation as defined below, times the greater of (A) eighteen
months (18) months, reduced by one month for each completed month
that has elapsed from the occurrence of the event constituting a
Change in Control and the Date of Termination, or (B) three (3)
months. For purposes of this Section 4(d)(ii), Monthly
Compensation shall mean 1/12th of the Executives annual base
salary (regardless of whether all or any portion of such salary has
been contributed to a deferred compensation plan), without giving
effect to any reduction in such compensation which would constitute
a breach of this Agreement. The Severance Payment shall be paid in
a single lump sum within 60 days after the Date of Termination and
upon receipt by HDI of the Executives full and complete release,
in a form acceptable to HDI, of any and all claims Executive has or
may have against HDI.



| |                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) For the number of months following the Date of
Termination upon which the Severance Payment is determined in
subsection (d)(ii) above, HDI shall arrange to provide, at its sole
expense, Executive with life, disability, accident and health
insurance benefits substantially similar to those that the
Executive is receiving or entitled to receive immediately prior to
the Notice of Termination.

6



---





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The cost of providing such benefits
shall be in addition to (and shall not reduce) the Severance
Payment. In the event that Executive cannot be covered under one
or more of HDI benefit plans, HDI will reimburse Executive for the
full cost of obtaining comparable alternative or individual
coverage elsewhere. Benefits otherwise receivable by Executive
pursuant to this paragraph (iii) shall be reduced to the extent
comparable benefits are actually received by Executive during such
period, and any such benefits actually received by Executive shall
be reported to HDI.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) Executive shall be entitled to receive any benefits accrued as
of the Date of Termination and payable to the Executive in accordance
with the terms and conditions of the HDI 401(k) SIMPLE Profit Sharing
Plan and Trust or any successor of such Plan and any other plan or
agreement relating to retirement benefits . Nothing herein shall expand
or accelerate the rights of Executive under the terms of any such plan or
agreement.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (f) Executive may, from and after the Date of Termination,
exercise any stock options previously granted, up to 100% of the shares
for which the option(s) has not yet been vested and/or exercised, in
accordance with the terms and conditions of any HDI stock purchase and
stock option plans or programs, or any successor to any such plans or
programs. Except as provided in the preceding sentence, nothing herein
shall expand or accelerate the rights of Executive under the terms of any
such plan or program.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (g) Executive shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor, except as provided in Section 4(d)(iii), shall the amount
of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by Executive as the result of employment by
another employer or by retirement benefits after the Date of Termination,
or otherwise.



| |                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (h) The Severance Payment provided for in this Section 4 shall
be in lieu of, and not in addition to, any other severance payments to
which Executive may be or become entitled under any other plan or program
established or maintained by HDI or pursuant to any termination provision
under any employment agreement between Executive and HDI.

5. Limitation on Parachute Payments. If, in the opinion of tax counsel
selected by HDI and acceptable to Executive, the Severance Payment plus all
other payments or benefits which constitute parachute payments within the
meaning of Internal Revenue Code Section 280G(b)(2) exceeds the amount that is
deductible by HDI by reason of Section 280G, and in the opinion of such tax
counsel, the Severance Payment (in its full amount or as partially reduced, as
the case may be) plus all other payments or benefits which constitute
parachute payments within the meaning of Section 280G(b)(2) are not
reasonable compensation for services actually rendered or to be rendered,
within the meaning of Section 280G(b)(4), the Severance Payment shall be
reduced by the excess of the aggregate parachute payments that would be paid
to or for

7



---



the Executive without any portion of such parachute payments not
being deductible by reason of Code Section 280G. The value of any non-cash
benefit or any deferred cash payments shall be determined by HDI in accordance
with the principles of Code Sections 280G(d)(3) and (4).

If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of
Executive and HDI in applying the terms of this subsection, the aggregate
parachute payments paid to or for Executives benefit are in an amount that
would result in any portion of such parachute payments not being deductible
by HDI or its Affiliates by reason of Code Section 280G, then Executive shall
have an obligation to pay HDI upon demand an amount equal to the sum of (A) the
excess of the aggregate parachute payments paid to or for the Executives
benefit over the aggregate parachute payments that would have been paid to or
for the Executives benefit without any portion of such parachute payments
not being deductible by reason of Code Section 280G; and (B) interest on the
amount set forth in clause (A) of this sentence at the applicable Federal rate
(as defined in Code Section 1274(d)) from the date of Executives receipt of
such excess until the date of such payment.

6. Funding of Payments. In order to assure the performance of HDI or its
successor of its obligations under this Agreement, HDI may, but is not required
to, deposit in a so called rabbi trust an amount equal to the maximum payment
that will be due the Executive under the terms hereof. Under a written trust
instrument, the Trustee shall be instructed to pay to the Executive (or the
Executives legal representative, as the case may be) the amount to which the
Executive shall be entitled under the terms hereof, and the balance, if any, of
the trust not so paid or reserved for payment shall be repaid to HDI. If HDI
elects to deposit funds in such a rabbi trust, such deposit to the trust shall
be made no later than the occurrence of a Change in Control. If and to the
extent there are not amounts in trust sufficient to pay Executive under this
Agreement, HDI shall remain liable for any and all payments due to Executive.
In accordance with the terms of such trust, at all times during the term of
this Agreement, Executive shall have no rights, other than as an unsecured
general creditor of HDI, to any amounts held in trust and all trust assets
shall be general assets of HDI and subject to the claims of creditors of HDI.
Failure of HDI to establish or fully fund such trust shall not be deemed a
revocation or termination of this Agreement by HDI.

7. Successors; Binding Agreement.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) This agreement shall not be assignable, in whole or in part, by
either party without the written consent of the other party, except that
HDI may, without the consent of Executive, assign its rights and
obligations under this agreement to any corporation, firm or other
business entity with or into which HDI may merge or consolidate, or to
which HDI may sell or transfer all or substantially all of its assets.
After any such assignment, HDI shall be discharged from all further
liability hereunder and such assignee shall thereafter be deemed to be
HDI for purposes of all provisions of this agreement, including this
Section 7.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) This Agreement shall inure to the benefit of and be enforceable
by Executives personal or legal representatives, successors, heirs, and
designated beneficiaries. If Executive should die while any amount would
still be payable to Executive hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executives
designated beneficiaries, or, if there is no such designated beneficiary,
to the Executives estate.

8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the last known residence address of the Executive or in the case
of HDI, to its principal office to the attention of each of the then directors
of HDI with a copy to its Secretary, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.

9. Attorneys Fees. In the event either party commences legal action or
other proceeding arising out of this Agreement, the prevailing party shall be
entitled to recover from the other party reasonable attorneys fees and costs
incurred by the prevailing party in such action or proceeding.

10. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed by such
other-party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or similar time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Minnesota.

11. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

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IN WITNESS WHEREOF, the undersigned officer, on behalf of Hypertension
Diagnostics, Inc., and the Executive have hereunto set their hands as of the
date first above written.



| | HYPERTENSION DIAGNOSTICS, INC.
| | ------------------------------



| | By /s/ Dennis L. Sellke
Dennis L. Sellke
Chief Executive Officer
| | ----------------------------------------------------------------



| | EXECUTIVE:
| | ----------



| | /s/ James S. Murphy
James S. Murphy
| | -----------------------------------

Dated: December 22, 1999

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