Exhibit 10.1


ELECTROMED,
INC.

2014 EQUITY INCENTIVE PLAN


SECTION 1.

DEFINITIONS


          As used
herein, the following terms shall have the meanings indicated below:


          (a)          “Administrator” shall mean the Board of Directors of
the Company, or one or more Committees appointed by the Board of Directors, as
the case may be.


          (b)          “Affiliate(s)”
shall mean a Parent or Subsidiary of the Company.


          (c)          “Agreement”
shall mean the written agreement entered into by the Participant and the
Company evidencing the grant of an Award. Each Agreement shall be in such form
as may be approved from time to time by the Administrator and may vary from
Participant to Participant. 


          (d)          “Annual
Award Limit” or “Annual Award Limits” shall have the meaning set forth in
Section 6(d) of the Plan.


          (e)          “Award”
shall mean any grant pursuant to the Plan of an Incentive Stock Option,
Nonqualified Stock Option, Restricted Stock Award or Restricted Stock Unit.


          (f)          “Change
of Control” shall mean the
occurrence, in a single transaction or in a series of related transactions, of
any one or more of the events in subsections (i) through (iv) below. For
purposes of this definition, a person, entity or group shall be deemed to
“Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership”
of securities if such person, entity or group directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise, has or
shares Voting Power, which includes the power to vote or to direct the voting,
with respect to such securities.


	
  

 	
  

 
	
  

 	
             (i)          Any
 person, entity or group becomes the Owner, directly or indirectly, of
 securities of the Company representing more than fifty percent (50%) of the
 combined Voting Power of the Company’s then outstanding securities other than
 by virtue of a merger, consolidation, exchange, reorganization or similar
 transaction. Notwithstanding the foregoing, a Change of Control shall not be
 deemed to occur (A) on account of the acquisition of securities of the
 Company by an investor, any affiliate thereof or any other person, entity or
 group from the Company in a transaction or series of related transactions the
 primary purpose of which is to obtain financing for the Company through the
 issuance of equity securities or (B) solely because the level of Ownership
 held by any person, entity or group (the “Subject Person”) exceeds the
 designated percentage threshold of the Voting Power as a result of a
 repurchase or other acquisition of voting securities by the Company reducing
 the number of shares outstanding, provided that if a Change of Control would
 occur (but for the operation of this sentence) as a result of the acquisition
 of voting securities by the Company, and after such share acquisition, the
 Subject Person becomes the Owner of any additional voting securities that,
 assuming the repurchase or other acquisition had not occurred, increases the
 percentage of the then outstanding voting securities Owned by the Subject
 Person over the designated percentage threshold, then a Change of Control
 shall be deemed to occur;

 













	
  

 	
  

 
	
  

 	
           (ii)          There
 is consummated a merger, consolidation, exchange, reorganization or similar
 transaction involving (directly or indirectly) the Company and, immediately
 after the consummation of such merger, consolidation, exchange,
 reorganization or similar transaction, the shareholders of the Company
 immediately prior thereto do not Own, directly or indirectly, either (A)
 outstanding voting securities representing more than fifty percent (50%) of
 the combined outstanding Voting Power of the surviving entity in such merger,
 consolidation or similar transaction or (B) more than fifty percent (50%) of
 the combined outstanding Voting Power of the parent of the surviving entity
 in such merger, consolidation, exchange, reorganization or similar
 transaction, in each case in substantially the same proportions as their
 Ownership of the outstanding voting securities of the Company immediately
 prior to such transaction;

 
	
  

 	
  

 
	
  

 	
           (iii)          There
 is consummated a sale, lease, exclusive license or other disposition of all
 or substantially all of the total gross value of the consolidated assets of
 the Company and its subsidiaries, other than a sale, lease, license or other
 disposition of all or substantially all of the total gross value of the
 consolidated assets of the Company and its subsidiaries to an entity, more
 than fifty percent (50%) of the combined Voting Power of the voting
 securities of which are Owned by shareholders of the Company in substantially
 the same proportions as their Ownership of the outstanding voting securities
 of the Company immediately prior to such sale, lease, license or other disposition
 (for purposes of this Section 1(f)(iii), “gross value” means the value of the
 assets of the Company or the value of the assets being disposed of, as the
 case may be, determined without regard to any liabilities associated with
 such assets); or

 
	
  

 	
  

 
	
  

 	
           (iv)          Individuals
 who, at the beginning of any consecutive twelve-month period, are members of
 the Board (the “Incumbent Board”) cease for any reason to constitute at least
 a majority of the members of the Board at any time during that consecutive
 twelve-month period; provided, however, that if the appointment or election
 (or nomination for election) of any new Board member was approved or
 recommended by a majority vote of the members of the Incumbent Board then
 still in office, such new member shall, for purposes of the Plan, be
 considered as a member of the Incumbent Board. 

 


For
the avoidance of doubt, the term “Change of Control” shall not include a sale
of assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company. To the extent required, the determination
of whether a Change of Control has occurred shall be made in accordance with
Code Section 409A and the regulations, notices and other guidance of general
applicability issued thereunder. 





          (g)          “Close
of Business” of a specified day shall mean 5:00 p.m., Central Time, without
regard to whether such day is a Saturday, Sunday, bank holiday, or other day on
which no business is conducted.


          (h)          “Committee”
shall mean a Committee of two or more Directors who shall be appointed by and
serve at the pleasure of the Board. To the extent necessary for compliance with
Rule 16b-3, each of the members of the Committee shall be a “non-employee
director.” Solely for purposes of this Section 1(h), “non-employee director”
shall have the same meaning as set forth in Rule 16b-3. Further, to the extent
necessary for compliance with the limitations set forth in Internal Revenue
Code Section 162(m), each of the members of the Committee shall be an “outside
director” within the meaning of Code Section 162(m) and the regulations issued
thereunder.


          (i)          “Common
Stock” shall mean the common stock of the Company (subject to adjustment as
provided in Section 13 of the Plan). 


          (j)          The
“Company” shall mean Electromed, Inc., a Minnesota corporation.


          (k)          “Consultant”
shall mean any person, including an advisor, who is engaged by the Company or
any Affiliate to render consulting or advisory services and is compensated for
such services; provided, however, that no person shall be considered a
Consultant for purposes of the Plan unless such Consultant is a natural person,
renders bona fide services to the Company or any Affiliate, and such services
are not in connection with the offer or sale of securities in a capital raising
transaction and do not directly or indirectly promote or maintain a market for
the Company’s securities. For purposes of the Plan, “Consultant”
shall also include a director of an Affiliate who is compensated for services
as a director. 


          (l)          “Covered
Employee” shall mean any key salaried Employee who is or may become a “Covered
Employee,” as defined in Code Section 162(m), and who is designated, either as
an individual Employee or class of Employees, by the Administrator within the
shorter of (i) ninety (90) days after the beginning of the Performance Period,
or (ii) twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered
Employee” under the Plan for such applicable Performance Period. 


          (m)          “Director”
shall mean a member of the Board of Directors of the Company. 


          (n)          “Effective
Date” shall mean the date the Board of Directors of the Company approves the
amendment and restatement of the Plan. 


          (o)          “Employee”
shall mean a common law employee of the Company or any Affiliate, including
“officers” as defined by Section 16 of the Exchange Act; provided, however,
that service solely as a Director or Consultant, regardless of whether a fee is
paid for such service, shall not cause a person to be an Employee for purposes
of the Plan. 


          (p)          “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder. 





          (q)          “Fair
Market Value” of specified stock as of any date shall mean (i) if such stock is
listed on the Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Capital
Market or an established stock exchange, the price of such stock at the close
of the regular trading session of such market or exchange on such date, as
reported by The Wall Street Journal or a comparable reporting service,
or, if no sale of such stock shall have occurred on such date, on the next
preceding date on which there was a sale of stock; (ii) if such stock is not so
listed on the Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Capital
Market, or an established stock exchange, the average of the closing “bid” and
“asked” prices quoted by the OTC Bulletin Board, the National Quotation Bureau,
or any comparable reporting service on such date or, if there are no quoted
“bid” and “asked” prices on such date, on the next preceding date for which
there are such quotes; or (iii) if such stock is not publicly traded as of such
date, the per share value as determined by the Board or the Committee in its
sole discretion by applying principles of valuation with respect to Common
Stock.


          (r)          “Incentive
Stock Option” shall mean an Option granted pursuant to Section 9 of the Plan
that is intended to satisfy the provisions of Code Section 422, or any
successor provision. 


          (s)          “Insider”
shall mean an individual who is, on the relevant date, an officer or Director
of the Company, or an individual who beneficially owns more than ten percent
(10%) of any class of equity securities of the Company that is registered under
Section 12 of the Exchange Act, as determined by the Board of Directors in
accordance with Section 16 of the Exchange Act.


          (t)          The
“Internal Revenue Code” or “Code” shall mean the Internal Revenue Code of 1986,
as amended from time to time. References to sections of the Code are intended
to include applicable treasury regulations and successor statutes and
regulations.


          (u)          “Option”
shall mean an Incentive Stock Option or Nonqualified Stock Option granted
pursuant to the Plan.


          (v)          “Nonqualified
Stock Option” shall mean an Option granted pursuant to Section 10 of the Plan
or an Option (or portion thereof) that does not qualify as an Incentive Stock
Option. 


          (w)          “Parent”
shall mean any parent corporation of the Company within the meaning of Code
Section 424(e), or any successor provision. 


          (x)          “Participant”
shall mean an Employee to whom an Incentive Stock Option has been granted or an
Employee, a Director, or a Consultant to whom a Nonqualified Stock Option,
Restricted Stock Award or Restricted Stock Unit has been granted. 


          (y)          “Performance-Based
Compensation” shall mean compensation under an Award that is intended to
satisfy the requirements of Code Section 162(m) for certain performance-based
compensation paid to Covered Employees. Notwithstanding the foregoing, nothing
in the Plan shall be construed to mean that an Award which does not satisfy the
requirements for performance-based compensation under Code Section 162(m) does
not constitute performance-based compensation for other purposes, including
Code Section 409A.





          (z)          “Performance
Objective(s)” shall mean one or more performance objectives set forth in
Section 7 and established by the Administrator, in its sole discretion, for
Awards granted under the Plan. 


          (aa)          “Performance
Period” shall mean the period, established at the time any Award is granted or
at any time thereafter, during which any Performance Objectives specified by
the Administrator with respect to such Award are to be measured. 


          (bb)          “Plan”
means the Electromed, Inc. 2014 Equity Incentive Plan, as amended hereafter
from time to time, including the form of Agreements as they may be modified by
the Administrator from time to time.


          (cc)          “Restricted
Stock Award” shall mean any grant of restricted shares of Common Stock pursuant
to Section 11 of the Plan. 


          (dd)          “Restricted
Stock Unit” shall mean any grant of any restricted stock units pursuant to
Section 12 of the Plan.


          (ee)          “Rule
16b-3” shall mean Rule 16b-3, or any successor provision, as then in effect, of
the General Rules and Regulations under the Exchange Act.


          (ff)           A
“Subsidiary” shall mean any subsidiary corporation of the Company within the
meaning of Code Section 424(f), or any successor provision.


          (gg)         
“Voting Power” shall mean any and all classes of securities issued by the
applicable entity which are entitled to vote in the election of directors of
the applicable entity.


SECTION 2.

PURPOSE


          The purpose
of the Plan is to promote the success of the Company and its Affiliates by
facilitating the employment and retention of competent personnel and by
furnishing incentives to those Employees, Directors, and Consultants upon whose
efforts the success of the Company and its Affiliates will depend to a large
degree. It is the intention of the Company to carry out the Plan through the
granting of Incentive Stock Options, Nonqualified Stock Options, Restricted
Stock Awards and Restricted Stock Units. 


SECTION 3.

EFFECTIVE DATE AND DURATION OF PLAN


          The Plan
shall be effective on the Effective Date; provided, however, that adoption of
the Plan shall be and is expressly subject to the condition of approval by the
shareholders of the Company within twelve (12) months before or after the
Effective Date. Although Awards may be granted prior to the date the Plan is
approved by the shareholders of the Company, any Incentive Stock Options granted
after the Effective Date shall be treated as Nonqualified Stock Options if
shareholder approval is not obtained within such twelve-month period. 





          The
Administrator may grant Awards pursuant to the Plan from time to time until the
Administrator discontinues or terminates the Plan; provided, however, that in
no event may Incentive Stock Options be granted pursuant to the Plan after the
earlier of (i) the date the Administrator discontinues or terminates the Plan,
or (ii) the Close of Business on the day immediately preceding the tenth
anniversary of the Effective Date. 


SECTION 4.

ADMINISTRATION


          (a)          Administration
by the Board of Directors or Committee(s). The Plan shall be administered
by the Board of Directors of the Company (hereinafter referred to as the
“Board”); provided, however, that the Board may delegate some or all of the
administration of the Plan to a Committee or Committees. The Board and any
Committee appointed by the Board to administer the Plan are collectively referred
to in the Plan as the “Administrator.”


          (b)          Delegation
by Administrator. The Administrator may delegate to one or more Committees
and/or sub-Committees, or to one or more officers of the Company and/or its
Affiliates, or to one or more agents and/or advisors, such administrative
duties or powers as it may deem advisable. The Administrator or any Committees
or individuals to whom it has delegated duties or powers as aforesaid may
employ one or more individuals to render advice with respect to any
responsibility of the Administrator or such Committees or individuals may have
under the Plan. The Administrator may, by resolution, authorize one or more
officers of the Company to do one or both of the following on the same basis as
can the Administrator: (i) designate Employees to be recipients of Awards and
(ii) determine the size of any such Awards; provided, however, (x) the
Committee shall not delegate such responsibilities to any such officer for
Awards granted to an Employee who is considered an Insider; (y) the resolution
providing such authorization sets forth the total number of Awards such
officer(s) may grant; and (z) the officer(s) shall report periodically to the
Administrator regarding the nature and scope of the Awards granted pursuant to
the authority delegated.


          (c)          Powers
of Administrator. Except as otherwise provided herein, the Administrator
shall have all of the powers vested in it under the provisions of the Plan,
including but not limited to exclusive authority to determine, in its sole
discretion, whether an Award shall be granted; the individuals to whom, and the
time or times at which, Awards shall be granted; the number of shares subject
to each Award; the exercise price of Options granted hereunder; and the
performance criteria, if any, and any other terms and conditions of each Award.
The Administrator shall have full power and authority to administer and
interpret the Plan, to make and amend rules, regulations and guidelines for
administering the Plan, to prescribe the form and conditions of the respective
Agreements evidencing each Award (which may vary from Participant to
Participant), to amend or revise Agreements evidencing any Award (to the extent
the amended terms would be permitted by the Plan and provided that no such
revision or amendment, except as is authorized in Section 13, shall impair the
terms and conditions of any Award which is outstanding on the date of such
revision or amendment to the material detriment of the Participant in the
absence of the consent of the Participant), and to make all other
determinations necessary or advisable for the administration of the Plan
(including to correct any defect, omission or inconsistency in the Plan or any
Agreement, to the extent permitted by law and the Plan). The Administrator’s
interpretation of the Plan, and all actions taken and determinations made by
the Administrator pursuant to the power vested in it hereunder, shall be
conclusive and binding on all parties concerned. 





          (d)          Limitation
on Liability; Actions of Committees. No member of the Board or a Committee
shall be liable for any action taken or determination made in good faith in
connection with the administration of the Plan. In the event the Board appoints
a Committee as provided hereunder, or the Administrator delegates any of its
duties to another Committee or sub-Committee, any action of such Committee with
respect to the administration of the Plan shall be taken pursuant to a majority
vote of the Committee members or pursuant to the written resolution of all
Committee members. 


SECTION 5.

PARTICIPANTS


          The
Administrator may grant Awards under the Plan to any Employee, Director, or
Consultant; provided, however, that only Employees are eligible to receive
Incentive Stock Options. In designating Participants, the Administrator shall
also determine the number of shares or cash units to be optioned or awarded to
each such Participant and any Performance Objectives applicable to Awards. The
Administrator may from time to time designate individuals as being ineligible
to participate in the Plan. The power of the Administrator under this Section 5
shall be exercised from time to time in the sole discretion of the
Administrator and without approval by the shareholders. 


SECTION 6.

STOCK


          (a)          Number
of Shares Reserved. The stock to be awarded or optioned under the Plan (the
“Share Authorization”) shall consist of authorized but unissued or reacquired
shares of Common Stock. Subject to Section 13 of the Plan, the maximum
aggregate number of shares of Common Stock reserved and available for Awards
under the Plan is reserved and available for Awards under the Plan is
Six Hundred Fifty Thousand (650,000) shares; provided, however, that all shares
of Stock reserved and available under the Plan shall constitute the maximum
aggregate number of shares of Stock that may be issued through Incentive Stock
Options. 


          (b)          Share
Usage. The following shares of Common Stock shall not reduce the Share
Authorization and shall continue to be reserved and available for Awards
granted pursuant to the Plan: (i) all or any portion of any outstanding
Restricted Stock Award or Restricted Stock Unit that expires or is forfeited
for any reason, or that is terminated prior to the vesting or lapsing of the
risks of forfeiture on such Award, and (ii) shares of Common Stock covered by
an Award to the extent the Award is settled in cash. Any shares of Common Stock
withheld to satisfy tax withholding obligations on an Award, shares of Common
Stock withheld to pay the exercise price of an Option, and shares of Common
Stock subject to a broker-assisted
cashless exercise of an Option shall reduce the Share Authorization.





           (c)          Annual
Award Limits. Unless and until the Administrator determines that an Award
to a Covered Employee shall not be Performance-Based Compensation, the
following limits (each, an “Annual Award Limit,” and collectively, “Annual
Award Limits”) shall apply to grants of such Awards under the Plan: 


	
  

 	
  

 
	
  

 	
           (i)          Options.
 The maximum number of shares of Common Stock subject to Options granted in
 any one calendar year to any one Participant shall be, in the aggregate,
 Seventy-Five Thousand (75,000) shares, subject to adjustment as
 provided in Section 13.

 
	
  

 	
  

 
	
  

 	
           (ii)          Restricted
 Stock Awards and Restricted Stock Units. The maximum grant with respect
 Restricted Stock Awards and Restricted Stock Units in any one calendar year
 to any one Participant shall be, in the aggregate, Thirty-Five Thousand
 (35,000) shares, subject to adjustment as provided in Section 13.

 


SECTION 7.

PERFORMANCE OBJECTIVES


           (a)          Performance
Objectives. For any Awards to Covered Employees that are intended to
qualify as “Performance-Based Compensation” under Code Section 162(m), the
Performance Objectives shall be limited to any one, or a combination of, (i)
revenue or net sales, (ii) operating income, (iii) net income (before or after
taxes), (iv) earnings per share, (v) earnings before or after taxes, interest,
depreciation and/or amortization, (vi) gross profit margin, (vii) return
measures (including, but not limited to, return on invested capital, assets,
capital, equity, sales), (viii) increase in revenue or net sales, (ix)
operating expense ratios, (x) operating expense targets, (xi) productivity
ratios, (xii) gross or operating margins, (xiii) cash flow (including, but not
limited to, operating cash flow, free cash flow, cash flow return on equity and
cash flow return on investment), (xiv) working capital targets, (xv) capital
expenditures, (xvi) share price (including, but not limited to, growth measures
and total shareholder return), (xvii) appreciation in the fair market value or
book value of the Common Stock, (xviii) debt to equity ratio or debt levels,
and (xix) market share, in all cases including, if selected by the
Administrator, threshold, target and maximum levels. 


          Any
Performance Objective may be used to measure the performance of the Company and/or
Affiliate, as a whole or with respect to any business unit, or any combination
thereof as the Administrator may deem appropriate, or any of the specified
Performance Objectives as compared to the performance of a group of competitor
companies, or published or special index that the Administrator, in its sole
discretion, deems appropriate. The Administrator also has the authority to
provide for accelerated vesting of any Award based on the achievement of
performance goals pursuant to the Performance Objectives; provided, however,
that such authority shall be subject to Code Section 162(m) with respect to
Awards intended to qualify as Performance-Based Compensation.





          (b)          Evaluation
of Performance Objectives. The Administrator may provide in any Award based
on Performance Objectives that any evaluation of performance may include or
exclude any of the following events that occurs during a Performance Period:
(i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii)
the effect of changes in tax laws, accounting principles, or other laws or
provisions affecting reported results, (iv) any reorganization and
restructuring programs, (v) extraordinary nonrecurring items as described in
FASB Accounting Standards Codification 225-20—Extraordinary and Unusual Items
and/or in Management’s Discussion and Analysis of financial condition and
results of operations appearing in the Company’s annual report to shareholders
for the applicable year, (vi) acquisitions or divestitures, and (vii) foreign
exchange gains and losses. To the extent such inclusions or exclusions affect
Awards to Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility. 


          (c)          Adjustment
of Performance-Based Compensation. Awards that are intended to qualify as
Performance-Based Compensation may not be adjusted upward. The Administrator
shall retain the discretion to adjust such Awards downward, either on a formula
or discretionary basis or any combination, as the Administrator determines. 


          (d)          Administrator
Discretion. In the event that applicable tax and/or securities laws change
to permit Administrator discretion to alter the governing Performance
Objectives without obtaining shareholder approval of such changes, the
Administrator shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Administrator
determines that it is advisable to grant Awards that shall not qualify as
Performance-Based Compensation, the Administrator may make such grants without
satisfying the requirements of Code Section 162(m) and, in such case, may apply
performance objectives other than those set forth in this Section 7. 


SECTION 8.

PAYMENT OF OPTION EXERCISE PRICE


          Upon the
exercise of an Option, Participants may pay the exercise price of an Option (i) in cash, or with a personal check,
certified check, or other cash equivalent, (ii) by the surrender by the
Participant to the Company of previously acquired unencumbered shares of Common
Stock (through physical delivery or attestation), (iii) through the withholding
of shares of Common Stock from the number of shares otherwise issuable upon the
exercise of the Option (e.g., a
net share settlement), (iv) through broker-assisted cashless exercise if such
exercise complies with applicable securities laws and any insider trading
policy of the Company, (v) such other form of payment as may be authorized by
the Administrator, or (vi) by a combination thereof. In the event the
Participant elects to pay the exercise price, in whole or in part, with
previously acquired shares of Common Stock or through a net share settlement,
the then-current Fair Market Value of the stock delivered or withheld shall
equal the total exercise price for the shares being purchased in such manner. 


          The
Administrator may, in its sole discretion, limit the forms of payment available
to the Participant and may exercise such discretion any time prior to the
termination of the Option granted to the Participant or upon any exercise of
the Option by the Participant. “Previously acquired shares of Common Stock”
means shares of Common Stock which the Participant owns on the date of exercise
(or for the period of time, if any, as may be required by generally accepted
accounting principles or any successor principles applicable to the Company).





          With
respect to payment in the form of Common Stock, the Administrator may require
advance approval or adopt such rules as it deems necessary to assure compliance
with Rule 16b-3, if applicable.


SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS


          Each
Incentive Stock Option shall be evidenced by an Incentive Stock Option
Agreement, which shall comply with and be subject to the following terms and
conditions:


          (a)          Number
of Shares and Exercise Price. The Incentive Stock Option Agreement shall
state the total number of shares covered by the Incentive Stock Option. Except
as permitted by Code Section 424(a), or any successor provision, the exercise
price per share shall not be less than one hundred percent (100%) of the per
share Fair Market Value of the Common Stock on the date the Administrator
grants the Incentive Stock Option; provided, however, that if a Participant
owns stock possessing more than ten percent (10%) of the total combined Voting Power of all classes of stock of the Company or of its Parent or any
Subsidiary, the exercise price per share of an Incentive Stock Option granted
to such Participant shall not be less than one hundred ten percent (110%) of
the per share Fair Market Value of Common Stock on the date of the grant of the
Incentive Stock Option. The Administrator shall have full authority and discretion
in establishing the exercise price and shall be fully protected in so doing.


          (b)          Exercisability
and Term. The Incentive Stock Option Agreement shall state when the
Incentive Stock Option becomes exercisable (i.e. “vests”), and, if applicable in the
Administrator’s discretion, shall describe the Performance Objectives and
Performance Period upon which vesting is based, the manner in which performance
shall be measured and the extent to which partial achievement of the
Performance Objectives may result in vesting of the Option. The Participant may
exercise the Incentive Stock Option, in full or in part, upon or after the
vesting date of such Option (or portion thereof). Notwithstanding anything in
the Plan or the Agreement to the contrary, the Participant may not exercise an
Incentive Stock Option after the maximum term of such Option, as such term is
specified in the Incentive Stock Option Agreement. Except as permitted by Code
Section 424(a), in no event shall any Incentive Stock Option be exercisable
during a term of more than ten (10) years after the date on which it is
granted; provided, however, that if a Participant owns stock possessing more
than ten percent (10%) of the total combined Voting Power of all classes of
stock of the Company or of its Parent or any Subsidiary, the Incentive Stock
Option granted to such Participant shall be exercisable during a term of not
more than five (5) years after the date on which it is granted. The
Administrator may accelerate the exercisability of any Incentive Stock Option
granted hereunder which is not immediately exercisable as of the date of grant.



          (c)          No
Rights as Shareholder. A Participant (or the Participant’s successors)
shall have no rights as a shareholder with respect to any shares covered by an
Incentive Stock Option until the date of the issuance of the Common Stock
subject to such Award upon exercise, as evidenced by a stock certificate or as
reflected in the books and records of the Company or its designated agent (i.e.,
a “book entry”). No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such shares are
actually issued (as evidenced in either certificated or book entry form). 





          (d)          Withholding.
The Company or its Affiliate shall be entitled to withhold and deduct from any
future payments to the Participant all legally required amounts necessary to
satisfy any and all withholding and employment-related taxes attributable to
the Participant’s exercise of an Incentive Stock Option or a “disqualifying
disposition” of shares acquired through the exercise of an Incentive Stock
Option as defined in Code Section 421(b), to require the Participant to remit
an amount sufficient to satisfy such withholding requirements, or to require
any combination thereof. In the event the Participant is required under the
Incentive Stock Option Agreement to pay the Company, or make arrangements
satisfactory to the Company respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its sole discretion,
require the Participant to satisfy such obligation, in whole or in part, by
delivering shares of Common Stock or by electing to have the Company withhold
shares of Common Stock otherwise issuable to the Participant as a result of the
exercise of the Incentive Stock Option. Such shares shall have a Fair Market
Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from
such exercise or disqualifying disposition. In no event may the Participant
deliver shares, nor may the Company or any Affiliate withhold shares, having a
Fair Market Value in excess of such statutory minimum required tax withholding.
The Participant’s delivery of shares or the withholding of shares for this
purpose shall occur on or before the later of (i) the date the Incentive Stock
Option is exercised or the date of the disqualifying disposition, as the case
may be, or (ii) the date that the amount of tax to be withheld is determined
under applicable tax law. 


          (e)          Vesting
Limitation. Notwithstanding any other provision of the Plan, the aggregate
Fair Market Value (determined as of the date an Incentive Stock Option is
granted) of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year (under the Plan and any other “incentive stock option” plans of the
Company or any Affiliate shall not exceed $100,000 (or such other amount as may
be prescribed by the Code from time to time); provided, however, that if the
exercisability or vesting of an Incentive Stock Option is accelerated as
permitted under the provisions of the Plan and such acceleration would result
in a violation of the limit imposed by this Section 9(e), such acceleration
shall be of full force and effect but the number of shares of Common Stock that
exceed such limit shall be treated as having been granted pursuant to a
Nonqualified Stock Option; and provided, further, that the limits imposed by
this Section 9(e) shall be applied to all outstanding Incentive Stock Options
under the Plan and any other “incentive stock option” plans of the Company or
any Affiliate in chronological order according to the dates of grant. 


          (f)          Other
Provisions. The Incentive Stock Option Agreement authorized under this
Section 9 shall contain such other provisions as the Administrator shall deem
advisable. Any such Incentive Stock Option Agreement shall contain such
limitations and restrictions upon the exercise of the Incentive Stock Option as
shall be necessary to ensure that such Incentive Stock Option will be
considered an “incentive stock option” as defined in Code Section 422 or to
conform to any change therein.





SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS


          Each
Nonqualified Stock Option shall be evidenced by a Nonqualified Stock Option
Agreement, which shall comply with and be subject to the following terms and
conditions:


          (a)          Number
of Shares and Exercise Price. The Nonqualified Stock Option Agreement shall
state the total number of shares covered by the Nonqualified Stock Option. The
exercise price per share shall be equal to one hundred percent (100%) of the
per share Fair Market Value of the Common Stock on the date of grant of the
Nonqualified Stock Option, or such higher price as the Administrator
determines.


          (b)          Exercisability
and Term. The Nonqualified Stock Option Agreement shall state when the
Nonqualified Stock Option becomes exercisable (i.e. “vests”) and, if
applicable in the Administrator’s discretion, shall describe the Performance
Objectives and Performance Period upon which vesting is based, the manner in
which performance shall be measured and the extent to which partial achievement
of the Performance Objectives may result in vesting of the Option. The
Participant may exercise the Nonqualified Stock Option, in full or in part,
upon or after the vesting date of such Option (or portion thereof); provided,
however, that the Participant may not exercise a Nonqualified Stock Option
after the maximum term of such Option, as such term is specified in the
Nonqualified Stock Option Agreement. Unless otherwise determined by the
Administrator and specified in the Agreement governing the Award, no
Nonqualified Stock Option shall be exercisable during a term of more than ten
(10) years after the date on which it is granted. The Administrator may
accelerate the exercisability of any Nonqualified Stock Option granted
hereunder which is not immediately exercisable as of the date of grant.


          (c)          No
Rights as Shareholder. A Participant (or the Participant’s successors)
shall have no rights as a shareholder with respect to any shares covered by a
Nonqualified Stock Option until the date of the issuance of the Common Stock
subject to such Award upon exercise, as evidenced by a stock certificate or as
reflected in the books and records of the Company or its designated agent (i.e.,
a “book entry”). No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such shares are
actually issued (as evidenced in either certificated or book entry form). 


          (d)          Withholding.
The Company or its Affiliate shall be entitled to withhold and deduct from any
future payments to the Participant all legally required amounts necessary to
satisfy any and all withholding and employment-related taxes attributable to
the Participant’s exercise of a Nonqualified Stock Option, to require the
Participant to remit an amount sufficient to satisfy such withholding
requirements, or to require any combination thereof. In the event the
Participant is required under the Nonqualified Stock Option Agreement to pay
the Company, or make arrangements satisfactory to the Company respecting
payment of, such withholding and employment-related taxes, the Administrator
may, in its sole discretion, require the Participant to satisfy such obligation,
in whole or in part, by delivering shares of Common Stock or by electing to
have the Company withhold shares of Common Stock otherwise issuable to the
Participant as a result of the exercise of the Nonqualified Stock Option. Such
shares shall have a Fair Market Value equal to the minimum required tax
withholding, based on the minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes, that are applicable to the
supplemental income resulting from such exercise. In no event may the
Participant deliver shares, nor may the Company or any Affiliate withhold
shares, having a Fair Market Value in excess of such statutory minimum required
tax withholding. The Participant’s delivery of shares or the withholding of shares
for this purpose shall occur on or before the later of (i) the date the
Nonqualified Stock Option is exercised, or (ii) the date that the amount of tax
to be withheld is determined under applicable tax law. 





          (e)          Other
Provisions. The Nonqualified Stock Option Agreement authorized under this
Section 10 shall contain such other provisions as the Administrator shall deem
advisable.


SECTION 11.

RESTRICTED STOCK AWARDS


          Each
Restricted Stock Award shall be evidenced by a Restricted Stock Award
Agreement, which shall comply with and be subject to the following terms and
conditions:


          (a)          Number
of Shares. The Restricted Stock Award Agreement shall state the total
number of shares of Common Stock covered by the Restricted Stock Award.


          (b)          Risks
of Forfeiture. The Restricted Stock Award Agreement shall set forth the
risks of forfeiture, if any, which shall apply to the shares of Common Stock
covered by the Restricted Stock Award and the manner in which such risks of
forfeiture shall lapse, including, if applicable in the Administrator’s
discretion, a description of the Performance Objectives and Performance Period
upon which the lapse of risks of forfeiture is based, the manner in which
performance shall be measured and the extent to which partial achievement of
the Performance Objectives may result in lapse of risks of forfeiture. The
Administrator may, in its sole discretion, modify the manner in which such
risks of forfeiture shall lapse but only with respect to those shares of Common
Stock which are restricted as of the effective date of the modification. 


          (c)          Issuance
of Shares; Rights as Shareholder. Except as provided below, the Company
shall cause a stock certificate to be issued and shall deliver such certificate
to the Participant or hold such certificate in a manner determined by the
Administrator in its sole discretion; provided, however, that in lieu of a
stock certificate, the Company may evidence the issuance of shares by a book
entry in the records of the Company or its designated agent (if permitted by
the Company’s designated agent and applicable law, as determined by the
Administrator in its sole discretion). The Company shall cause a legend or
notation to be placed on such certificate or book entry describing the risks of
forfeiture and other transfer restrictions set forth in the Participant’s
Restricted Stock Award Agreement and providing for the cancellation and, if
applicable, return of such certificate or book entry if the shares of Common
Stock subject to the Restricted Stock Award are forfeited. Until the risks of
forfeiture have lapsed or the shares subject to such Restricted Stock Award
have been forfeited, the Participant shall be entitled to vote the shares of
Common Stock represented by such stock certificates and shall receive all
dividends attributable to such shares, but the Participant shall not have any
other rights as a shareholder with respect to such shares.





          (d)          Withholding
Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from any future payments to the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s Restricted Stock Award, to require the
Participant to remit an amount sufficient to satisfy such withholding
requirements, or to require any combination thereof. In the event the
Participant is required under the Restricted Stock Award Agreement to pay the Company,
or make arrangements satisfactory to the Company respecting payment of, such
withholding and employment-related taxes, the Administrator may, in its sole
discretion, require the Participant to satisfy such obligations, in whole or in
part, by delivering shares of Common Stock, including shares of Common Stock
received pursuant to the Restricted Stock Award on which the risks of
forfeiture have lapsed. Such shares shall have a Fair Market Value equal to the
minimum required tax withholding, based on the minimum statutory withholding
rates for federal and state tax purposes, including payroll taxes, that are
applicable to the supplemental income resulting from the lapsing of the risks
of forfeiture on such Restricted Stock Award. In no event may the Participant
deliver shares having a Fair Market Value in excess of such statutory minimum
required tax withholding. The Participant’s delivery of shares shall occur on
or before the date that the amount of tax to be withheld is determined under
applicable tax law. 


          (e)          Other
Provisions. The Restricted Stock Award Agreement authorized under this
Section 11 shall contain such other provisions as the Administrator shall deem
advisable. 


SECTION 12.

RESTRICTED STOCK UNITS


          Each
Restricted Stock Unit shall be evidenced by a Restricted Stock Unit Agreement,
which shall comply with and be subject to the following terms and conditions:


          (a)          Number
of Shares. The Restricted Stock Unit Agreement shall state the total number
of shares of Common Stock covered by the Restricted Stock Unit.


          (b)          Vesting.
The Restricted Stock Unit Agreement shall set forth the vesting conditions, if
any, which shall apply to the Restricted Stock Unit and the manner in which
such vesting may occur, including, if applicable in the Administrator’s
discretion, a description of the Performance Objectives and Performance Period
upon which vesting is based, the manner in which performance shall be measured
and the extent to which partial achievement of the Performance Objectives may
result in vesting of the Restricted Stock Unit. The Administrator may, in its
sole discretion, accelerate the vesting of any Restricted Stock Unit. 





          (c)          Issuance
of Shares; Rights as Shareholder. The Participant shall be entitled to
payment of the Restricted Stock Unit as the units subject to such Award vest.
The Administrator may, in its sole discretion, pay Restricted Stock Units in
shares of Common Stock, cash in an amount equal to the Fair Market Value, on
the date of payment, of the number of shares of Common Stock underlying the
Award that have vested on the applicable payment date, or any combination
thereof, as specified in the Restricted Stock Unit Agreement. If payment is
made in shares of Common Stock, the Administrator shall cause to be issued one
or more stock certificates in the Participant’s name and shall deliver such
certificates to the Participant in satisfaction of such units; provided,
however, that in lieu of stock certificates, the Company may evidence such
shares by a book entry in the records of the Company or its designated agent
(if permitted by the Company’s designated agent and applicable law, as
determined by the Administrator in its sole discretion). Until the units
subject to the Restricted Stock Unit have vested, the Participant shall not be
entitled to vote any shares of Common Stock which may be acquired through the
Award, shall not receive any dividends attributable to such shares, and shall
not have any other rights as a shareholder with respect to such shares. 


          (d)          Withholding
Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from any future payments to the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s Restricted Stock Unit, to require the
Participant to remit an amount sufficient to satisfy such withholding
requirements, or to require any combination thereof. In the event the
Participant is required under the Restricted Stock Unit Agreement to pay the
Company, or make arrangements satisfactory to the Company respecting payment
of, such withholding and employment-related taxes, the Administrator may, in
its sole discretion, require the Participant to satisfy such obligations, in
whole or in part, by delivering shares of Common Stock, including shares of
Common Stock received pursuant to the Restricted Stock Unit. Such shares shall
have a Fair Market Value equal to the minimum required tax withholding, based
on the minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to the supplemental income
resulting from the payment of such Restricted Stock Unit. In no event may the
Participant deliver shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Participant’s delivery of
shares for this purpose shall occur on or before the date that the amount of
tax to be withheld is determined under applicable tax law.


          (e)          Other
Provisions. The Restricted Stock Unit Agreement authorized under this
Section 12 shall contain such other provisions as the Administrator shall deem
advisable. 


SECTION 13.

RECAPITALIZATION, EXCHANGE,

LIQUIDATION, OR CHANGE OF CONTROL


          (a)          In
General. In the event of an increase or decrease in the number of shares of
Common Stock resulting from a stock dividend, stock split, reverse split,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company, other than due to conversion of the
convertible securities of the Company, the Administrator may, in its sole
discretion, adjust the value determinations applicable to outstanding Awards
and the Plan in order to reflect such change, including adjustment of the class
and number of shares of stock reserved under Section 6 of the Plan, the class
and number of shares of stock covered by each outstanding Award, and, if and as
applicable, the exercise price per share of each outstanding Award and the
Annual Award Limits. Additional shares which may become covered by the Award
pursuant to such adjustment shall be subject to the same restrictions as are
applicable to the shares with respect to which the adjustment relates. 





          (b)          Liquidation.
Unless otherwise provided in the Agreement evidencing an Award, in the event of
a dissolution or liquidation of the Company, the Administrator may provide for
one or both of the following: 


	
  

 	
  

 
	
  

 	
           (i)          the
 acceleration of the exercisability of any or all outstanding Options, the
 vesting and payment of any or all Restricted Stock Units, or the lapsing of
 the risks of forfeiture on any or all Restricted Stock Awards; provided,
 however, that no such acceleration, vesting or payment shall occur if the
 acceleration, vesting or payment would violate the requirements of Code
 Section 409A; or 

 
	
  

 	
  

 
	
  

 	
           (ii)          the
 complete termination of the Plan and the cancellation of any or all Awards
 (or portions thereof) which have not been exercised, have not vested, or
 remain subject to risks of forfeiture, as applicable, in each case
 immediately prior to the completion of such a dissolution or liquidation.

 


          (c)          Change
of Control. Unless otherwise provided in the Agreement evidencing an Award,
in the event of a Change of Control, the Administrator may provide for one or
more of the following: 


	
  

 	
  

 
	
  

 	
           (i)          the
 acceleration of the exercisability, vesting, or lapse of the risks of
 forfeiture of any or all Awards (or portions thereof);

 
	
  

 	
  

 
	
  

 	
           (ii)          the
 complete termination of the Plan and the cancellation of any or all Awards
 (or portions thereof) which have not been exercised, have not vested, or
 remain subject to risks of forfeiture, as applicable, in each case as of the
 effective date of the Change of Control; 

 
	
  

 	
  

 
	
  

 	
           (iii)          that
 the entity succeeding the Company by reason of such Change of Control, or the
 parent of such entity, shall assume or continue any or all Awards (or
 portions thereof) outstanding immediately prior to the Change of Control or
 substitute for any or all such Awards (or portions thereof) a substantially
 equivalent award with respect to the securities of such successor entity, as
 determined in accordance with applicable laws and regulations; 

 
	
  

 	
  

 
	
  

 	
           (iv)          that
 Participants holding outstanding Awards shall become entitled to receive,
 with respect to each share of Common Stock subject to such Award (whether
 vested or unvested, as determined by the Administrator pursuant to subsection
 (c)(i) hereof) as of the effective date of any such Change of Control, cash
 in an amount equal to (1) for Participants holding Options, the excess of the
 Fair Market Value of such Common Stock on the date immediately preceding the
 effective date of such Change of Control over the exercise price per share of
 Options, or (2) for Participants holding Awards other than Options, the Fair
 Market Value of such Common Stock on the date immediately preceding the
 effective date of such Change of Control. 

 









The Administrator need not take the same action with respect to all
Awards (or portions thereof) or with respect to all Participants. In addition,
the Administrator may restrict the rights of or the applicability of this
Section 13 to the extent necessary to comply with Section 16(b) of the Exchange
Act, the Internal Revenue Code or any other applicable law or regulation. The
grant of an Award pursuant to the Plan shall not limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.


SECTION 14.

NONTRANSFERABILITY


          (a)          
In General. Except as expressly provided in the Plan or an Agreement, no
Award shall be transferable by the Participant, in whole or in part, other than
by will or by the laws of descent and distribution. If the Participant shall
attempt any transfer of any Award, such transfer shall be void and the Award
shall terminate.


          (b)          Nonqualified
Stock Options. Notwithstanding anything in this Section 14 to the contrary,
the Administrator may, in its sole discretion, permit the Participant to
transfer any or all Nonqualified Stock Options to any member of the
Participant’s “immediate family” as such term is defined in Rule 16a-1(e) of
the Exchange Act, or any successor provision, or to one or more trusts whose
beneficiaries are members of such Participant’s “immediate family” or
partnerships in which such family members are the only partners; provided,
however, that the Participant cannot receive any consideration for the transfer
and such transferred Nonqualified Stock Option shall continue to be subject to
the same terms and conditions as were applicable to such Nonqualified Stock
Option immediately prior to its transfer. 


          (c)          Beneficiary
Designation. Each Participant may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of such Participant’s death before
receipt of any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by
the Administrator, and will be effective only when filed by the Participant in
writing with the Company during the Participant’s lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant’s death
shall be paid to the Participant’s estate.


SECTION 15.

INVESTMENT PURPOSE AND SECURITIES COMPLIANCE


          No shares
of Common Stock shall be issued pursuant to the Plan unless and until there has
been compliance, in the opinion of Company’s counsel, with all applicable legal
requirements, including without limitation, those relating to securities laws
and stock exchange listing requirements. As a condition to the issuance of
Common Stock to Participant, the Administrator may require Participant to (a)
represent that the shares of Common Stock are being acquired for investment and
not resale and to make such other representations as the Administrator shall
deem necessary or appropriate to qualify the issuance of the shares as exempt
from the Securities Act of 1933 and any other applicable securities laws, and
(b) represent that Participant shall not dispose of the shares of Common Stock
in violation of the Securities Act of 1933 or any other applicable securities
laws. 





          As a
further condition to the grant of any Option or the issuance of Common Stock to
a Participant, the Participant agrees to the following:


          (a)          In
the event the Company advises the Participant that it plans an underwritten
public offering of its Common Stock in compliance with the Securities Act of
1933, as amended, the Participant will execute any lock-up agreement the
Company and the underwriter(s) deem necessary or appropriate, in their sole
discretion, in connection with such public offering. 


          (b)          In
the event the Company makes any public offering of its securities and
determines in its sole discretion that it is necessary to reduce the number of
outstanding Awards so as to comply with any state’s securities or Blue Sky law
limitations with respect thereto, the Board of Directors of the Company shall
have the right (i) to accelerate the exercisability of any Award and the date
on which such Award must be exercised or remove the risks of forfeiture to
which the Award is subject, provided that the Company gives Participant prior
written notice of such acceleration or removal, and (ii) to cancel any
outstanding Awards (or portions thereof) which Participant does not exercise
prior to or contemporaneously with such public offering. 


          (c)          In
the event of a Change of Control, Participant will comply with Rule 145 of the
Securities Act of 1933 and any other restrictions imposed under other
applicable legal or accounting principles if Participant is an “affiliate” (as
defined in such applicable legal and accounting principles) at the time of the
Change of Control, and Participant will execute any documents necessary to
ensure compliance with such rules.


          The Company
reserves the right to place a legend on any stock certificate (or a notation on
any book entry shares permitted by the Administrator) issued in connection with
an Award pursuant to the Plan to assure compliance with this Section 15.


          The Company
shall not be required to register or maintain the registration of the Plan, any
Award, or any Common Stock issued or issuable pursuant to the Plan under the
Securities Act of 1933 or any other applicable securities laws. If the Company
is unable to obtain the authority that the Company or its counsel deems
necessary for the lawful issuance and sale of Common Stock under the Plan, the
Company shall not be liable for the failure to issue and sell Common Stock upon
the exercise, vesting, or lapse of restrictions of forfeiture of an Award
unless and until such authority is obtained. A Participant shall not be
eligible for the grant of an Award or the issuance of Common Stock pursuant to
an Award if such grant or issuance would violate any applicable securities law.






SECTION 16.

AMENDMENT OF THE PLAN


          The Board
may from time to time, insofar as permitted by law, suspend or discontinue the
Plan or revise or amend it in any respect; provided, however, that no such
suspension, termination, revision, or amendment, except as is authorized in
Section 13, shall impair the terms and conditions of any Award which is
outstanding on the date of such suspension, termination, revision, or amendment
to the material detriment of the Participant without the consent of the
Participant. Notwithstanding the foregoing, except as provided in Section 13 of
the Plan or to the extent required by applicable law or regulation, the Board
may not, without shareholder approval, revise or amend the Plan to (i)
materially increase the number of shares subject to the Plan, (ii) change the
designation of Participants, including the class of Employees, eligible to receive
Awards, (iii) decrease the price at which Options may be granted, (iv) cancel,
regrant, repurchase for cash, or replace Options that have an exercise price in
excess of the Fair Market Value of the Common Stock, or amend the terms of
outstanding Options to reduce their exercise price, (v) materially increase the
benefits accruing to Participants under the Plan, or (vi) make any modification
that will cause Incentive Stock Options to fail to meet the requirements of
Code Section 422. 


          To the
extent applicable, the Plan and all Agreements shall be interpreted to be
exempt from or comply with the requirements of Code Section 409A and, if
applicable, to comply with Code Section 422, in each case including the
regulations, notices, and other guidance of general applicability issued
thereunder. Furthermore, notwithstanding anything in the Plan or any Agreement
to the contrary, the Board may amend the Plan or Agreement to the extent
necessary or desirable to comply with such requirements without the consent of
the Participant. 


SECTION 17.

RIGHTS AND OBLIGATIONS ASSOCIATED WITH AWARDS


          (a)          No
Obligation to Exercise. The granting of an Option shall impose no
obligation upon the Participant to exercise such Option. 


          (b)          No
Employment or Other Service Rights. The granting of an Award hereunder
shall not impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ or service for any period.


          (c)          Unfunded
Plan. Participants shall have no right, title, or interest whatsoever in or
to any particular assets of the Company or any of its Affiliates by reason of
the right to receive a benefit under the terms of the Plan. Nothing contained
in the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between
the Company and any Participant, beneficiary, legal representative, or any
other person. To the extent that any person acquires a right to receive shares
of Common Stock or payments from the Company or any of its Affiliates under the
Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company or an Affiliate, as the case may be. All payments to be
made hereunder shall be paid from the general funds of the Company or an
Affiliate, as the case may be. In its sole discretion, the Administrator may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver the shares of Common Stock or make payments
in lieu of or with respect to Awards hereunder; provided, however, that the
existence of such trusts or other arrangements is consistent with the unfunded
status of the Plan. 





SECTION 18.

MISCELLANEOUS


          (a)          Issuance
of Shares. The Company is not
required to issue or remove restrictions on shares of Common Stock granted
pursuant to the Plan until the Administrator determines that: (i) all
conditions of the Award have been satisfied, (ii) all legal matters in
connection with the issuance have been satisfied, and (iii) the Participant has
executed and delivered to the Company such representations or agreements as the
Administrator may consider appropriate, in its sole discretion, to satisfy the
requirements of any applicable law or regulation. 


          (b)          Choice
of Law. The law of the state of Minnesota shall govern all questions
concerning the construction, validity, and interpretation of the Plan, without
regard to that state’s conflict of laws rules. 


          (c)          Severability.
In the event that any provision of the Plan shall be held illegal or invalid
for any reason, such illegality or invalidity shall not affect the remaining
provisions of the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included. 


          (d)          No
Duty to Notify. The Company shall have no duty or obligation to any
Participant to advise such Participant as to the time and manner of exercising
an Award or as to the pending termination or expiration of such Award. In
addition, the Company has no duty or obligation to minimize the tax
consequences of an Award to the Participant.