Document:

EXHIBIT 4.1

EVOLVING
SYSTEMS, INC.

2007 STOCK INCENTIVE PLAN

Adopted
by the Board of Directors on March 12, 2007

Approved by the Stockholders on June 15, 2007

1.             GENERAL

(a)           Purpose.  The
primary purposes of the Evolving Systems, Inc. 2007 Stock Incentive Plan are to
attract, retain and motivate employees, directors and consultants, to
compensate them for their contributions to the growth and profits of the
Company and its Affiliates and to encourage them to own Common Stock.

(b)           Types of Awards.  The Plan permits the award of (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation
Rights, (iv) Restricted Stock, (v) Restricted Stock Units, (vi) Performance
Awards, and (vii) Other Stock-Based Awards.

2.             DEFINITIONS

Except
as otherwise provided in an applicable Award Agreement, the following
capitalized terms shall have the meanings indicated below for purposes of the
Plan and any Award:

(a)           “Affiliate” means a
parent or subsidiary of the Company, with “parent” meaning an entity that
controls the Company directly or indirectly, through one or more
intermediaries, and “subsidiary” meaning an entity that is controlled by the
Company directly or indirectly, through one or more intermediaries.  Solely with respect to the grant of an Incentive
Stock Option, Affiliate means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined
in Sections 424(e) and (f), respectively, of the Code.

(b)           “Award” means any
award of an Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Unit, Performance Award, or Other Stock-Based Award.

(c)           “Award Agreement”
means the written or electronic document setting forth the terms and conditions
of an Award.  The Award Agreement is
subject to the terms and conditions of the Plan.

(d)           “Board” means the
Board of Directors of Evolving Systems, Inc.

(e)           “Change of Control”
means the occurrence of any of the following events:

(i)            a sale of
substantially all of the assets of the Company;

(ii)           a merger or
consolidation in which the Company is not the surviving corporation;

(iii)          a reverse merger in
which the Company is the surviving corporation but the shares of the Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; or

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(iv)          the acquisition by any
person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or any
Affiliate of the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors.

(f)            “Code” means the
Internal Revenue Code of 1986, as amended, and the applicable rulings,
regulations and guidance thereunder.

(g)           “Committee” means the
Compensation Committee of the Board or any committee designated by the Board to
administer the Plan, or if no committee is appointed, the Board.  The Compensation Committee or the Board may
designate one or more subcommittees to (i) consist solely of persons who
satisfy the applicable requirements of any stock exchange or national market
system on which the shares of Common Stock may be listed, (ii) consist solely
of persons who qualify as an “outside director” within the meaning of Section
162(m) of the Code, and (iii) consist solely of persons who qualify as a “non-employee
director” within the meaning of Rule 16b-3 promulgated under the Exchange Act.

(h)           “Common Stock” means
a share of Evolving Systems, Inc., common stock, $0.001 par value per share.

(i)            “Company” means
Evolving Systems, Inc., a Delaware corporation.

(j)            “Consultant” means
any person, including an advisor, engaged by the Company or an Affiliate to
render consulting or advisory services and who is compensated for such
services.

(k)           “Continuous Service”
means continuous service as an Employee, Director or Consultant to the Company
or an Affiliate.  Unless otherwise stated
in the applicable Award Agreement, a Participant’s change in position or duties
with the Company or any Affiliate shall not result in interrupted or terminated
service, so long as such Participant continues service as an Employee, Director
or Consultant.  Whether a termination or
interruption in service shall have occurred for purposes of the Plan shall be
determined by the Committee (or its designee), which determination shall be
final, binding and conclusive.

(l)            “Covered Employee” means
the chief executive officer and the four (4) highest compensated officers of
the Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of Section
162(m) of the Code and other employees who may become subject to such
reporting.

(m)          “Director” means a
member of the Board.

(n)           “Dividend Equivalents”
means any right granted under Section 11 of the Plan.

(o)           “Employee” means any
person employed by the Company or an Affiliate, determined in accordance with
the Company’s standard personnel policies and practices.

(p)           “Exchange Act” means
the U.S. Securities Exchange Act of 1934, as it may be amended from time to
time, or any successor act thereto.

(q)           “Fair Market Value”
means, as of any date, the value of the Common Stock of the Company determined
as follows:

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(i)            If the Common Stock is
listed on any established stock exchange, or traded on the Nasdaq Market, the
Fair Market Value of a share of Common Stock shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as quoted on
such exchange or market (or the exchange or market with the greatest volume of
trading in Common Stock) on the determination date, as reported in The Wall Street Journal or such other
source as the Board deems reliable. 
Unless otherwise provided by the Committee, if there is no closing sales
price (or closing bid if no sales were reported) for the Common Stock on the
determination date, then the Fair Market Value shall be the closing sales price
(or closing bid if no sales were reported) on the last preceding date for which
such quotation exists.

(ii)           In the absence of such
markets for the Common Stock, the Fair Market Value shall be determined in good
faith by the Committee.

(r)            “Full-Value Award”
means an Award of Restricted Stock, Restricted Stock Units, Performance Award
or Other Stock-Based Award.

(s)            “Incentive Stock Option”
means an Option granted under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code, or any successor provision
thereto.

(t)            “Nonstatutory Stock Option”
means an Option granted under Section 6 of the Plan that is not intended to be
an Incentive Stock Option.

(u)           “Option” or “Stock Option” means
a right to purchase one or more shares of Common Stock.

(v)           “Other Stock-Based Award”
means any right granted under Section 10 of the Plan.

(w)          “Participant” means
an eligible individual who is granted an Award under the Plan.

(x)           “Performance Award”
means any right granted under Section 9 of the Plan.

(y)           “Performance Criteria”
means any quantitative or qualitative measures, as determined by the Committee,
which may be used to measure the level of performance of the Company, an
Affiliate or any individual Participant during a Performance Period, including
any Qualifying Performance Criteria.

(z)            “Performance Period”
means any period as determined by the Committee in its sole discretion.

(aa)         “Person” means any
individual, corporation, partnership, association, joint-stock company, trust,
unincorporated organization, or government or political subdivision thereof.

(bb)         “Qualifying Performance Criteria”
means one or more of the following performance criteria applied to the
individual, the Company as a whole, an Affiliate, a business unit, or any
combination thereof, and measured quarterly, annually or cumulatively over a period
of years, on an absolute basis or relative to a pre-established target, to a
previous quarter or year’s results or to a designated comparison group, in each
case as specified by the Committee in the Award Agreement: (i) revenue (ii)
earnings before interest, taxes, depreciation and amortization (EBITDA), (iii)
net earnings, (iv) net income, and (v) cash flow, subject to adjustment by the
Committee to remove the effect of charges for restructurings, discontinued
operations, extraordinary items and all items of gain, loss or expense
determined to be extraordinary or unusual in nature or infrequent in
occurrence, related to the disposal of a segment or a business, or related to a
change in accounting principle or otherwise.

(cc)         “Plan” means this
Evolving Systems, Inc. 2007 Stock Incentive Plan.

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(dd)         “Restricted Stock”
means an Award of shares of Common Stock granted under Section 8 of the Plan.

(ee)         “Restricted Stock Unit”
means a right granted under Section 8 of the Plan that is denominated in shares
of Common Stock.

(ff)           “Share Reserve” means
as defined in Section 4 of the Plan.

(gg)         “Stock Appreciation Right”
means any right granted under Section 7 of the Plan.

(hh)         “Substitute Award” means
an Award granted in substitution for, or in assumption of, outstanding awards
previously granted by an entity acquired by the Company or an Affiliate or with
which the Company or Affiliate combines.

3.             PLAN ADMINISTRATION

(a)            Authority of the Committee.  Except as otherwise provided herein, the Plan
shall be administered by the Committee, which shall have the power to interpret
the Plan and to adopt such rules and guidelines for implementing the terms of
the Plan as it may deem appropriate.  The
Committee shall have the ability to modify the Plan provisions, to the extent
necessary, or delegate such authority, to accommodate any changes in law and
regulations in jurisdictions in which Participants will receive Awards.  Subject to the terms of the Plan and
applicable law, the Committee shall have full power and authority to:

(i)            designate
Participants;

(ii)           determine the type or
types of Awards to be granted to each Participant under the Plan;

(iii)          determine the number of
shares of Common Stock to be covered by (or with respect to which payments,
rights, or other matters are to be calculated in connection with) Awards;

(iv)          determine the terms and
conditions of any Award;

(v)           determine whether, to
what extent, and under what circumstances Awards may be settled or exercised in
cash, shares of Common Stock, other securities, or other Awards, or canceled,
forfeited, or suspended, and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended;

(vi)          determine whether, to
what extent, and under what circumstances cash, shares of Common Stock, other
securities, other Awards, and other amounts payable with respect to an Award
under the Plan shall be deferred either automatically or at the election of the
holder thereof or of the Committee;

(vii)         interpret and administer
the Plan and any instrument or agreement relating to, or Award made under, the
Plan;

(viii)       establish, amend, suspend,
or waive such rules and guidelines;

(ix)          appoint such agents as
it shall deem appropriate for the proper administration of the Plan;

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

(xi)           correct any defect,
supply any omission, or reconcile any inconsistency in the Plan or any Award in
the manner and to the extent it shall deem desirable to carry the Plan into
effect.

(b)           Administrative Actions.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time, and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any stockholder, and any employee of the Company or
of any Affiliate.  Actions of the
Committee may be taken by:

(i)             the Chairman of the
Committee;

(ii)            a subcommittee,
designated by the Committee;

(iii)           the Committee but with
one or more members abstaining or recusing himself or herself from acting on
the matter, so long as two or more members remain to act on the matter.  Such action, authorized by such a
subcommittee or by the Committee upon the abstention or recusal of such
members, shall be the action of the Committee for purposes of the Plan; or

(iv)          one or more officers of
the Company, as authorized by the Committee, or a committee of such officers
whose authority is subject to such terms and limitations set forth by the
Committee, and only with respect to Participants who are not officers or
directors of the Company for purposes of Section 16 of the Exchange Act.

(c)           No Liability.  No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan, any Award or any Award Agreement.

4.             SHARES SUBJECT TO THE
PLAN

(a)           Shares Available.  Subject to adjustment as
provided in Section 14 of the Plan, the maximum aggregate number of shares of
Common Stock that may be issued pursuant to Awards granted under the Plan shall
be 2,000,000 shares (“Share
Reserve”).  Each share of Common Stock
issued pursuant to an Award shall reduce the Share Reserve by one (1) share; provided, however, that for each
Full-Value Award, the Share Reserve shall be reduced by one and one-half (1.5)
shares.  To the extent that a
distribution pursuant to an Award is made in cash, the Share Reserve shall be
reduced by the number of shares of Common Stock subject to the redeemed or
exercised portion of the Award. 
Notwithstanding any other provision of the Plan to the contrary, the
maximum aggregate number of shares of Common Stock that may be issued under the
Plan pursuant to Incentive Stock Options is 2,000,000 shares, subject to
adjustment as provided in Section 14 of the Plan.

(b)           Individual Award Limits.  Subject to adjustment as provided in Section
14, the number of shares of Common Stock that may be granted under the Plan
during any calendar year to an individual Participant shall not exceed 500,000
shares.  The maximum dollar amount that
may be paid to a single Participant in any calendar year shall not exceed
$500,000.

(c)           Changes to the Share Reserve.  If an Award granted under the
Plan shall for any reason (i) expire, be canceled or otherwise terminate, in
whole or in part, without having been exercised or redeemed in full, (ii) be
reacquired by the Company prior to vesting, or (iii) be repurchased at cost by
the Company prior to vesting, the shares of Common Stock not acquired by the
Participant under such Award shall revert or be added to the Share Reserve and
become available for issuance under the Plan; 

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provided, however,
that shares of Common Stock shall not revert or be added to the Share Reserve
that are (A) tendered in payment of an Option, (B) withheld by the Company to
satisfy any tax withholding obligation, or (C) purchased by the Company with
the proceeds from the exercise of Options, and provided,
further, that shares of Common Stock covered by a Stock Appreciation
Right, to the extent the right is exercised and settled in shares of Common
Stock, and whether or not shares of Common Stock are actually issued to the
Participant upon exercise of the Stock Appreciation Right, shall be considered
issued or transferred pursuant to the Plan.

(d)           Source of Shares.  Any shares of Common Stock delivered pursuant
to an Award may consist, in whole or in part, of authorized and unissued shares
or reacquired shares, bought on the market or otherwise.

(e)           Substitute Awards.  In
the case of Substitute Awards, the shares of Common Stock subject to the
Substitute Award shall not reduce the Share Reserve.  If a Substitute Award shall for any reason
expire, be canceled or otherwise terminate, in whole or in part, be settled in
cash or otherwise settled by issuance of fewer shares, the shares of Common
Stock not acquired by the Participant shall not be added to the Share
Reserve.  Further, any shares of Common
Stock withheld or delivered to pay tax withholding obligations relating to a
Substitute Award shall not reduce the Share Reserve.

5.             ELIGIBILITY

Individuals
eligible to participate in this Plan include Employees, Directors and
Consultants of the Company, or any Affiliate; provided,
however, to the extent required under Section 409A of the Code, an
Affiliate of the Company shall include only an entity in which the Company
possesses at least twenty percent (20%) of the total combined voting power of
the entity’s outstanding voting securities or such other threshold ownership
percentage permitted under Section 409A of the Code.

6.             STOCK OPTIONS

(a)           Grant of Options.  The Committee is hereby authorized to grant
Options to Participants with the following terms and conditions, and any other
terms and conditions not inconsistent with the provisions of the Plan, as the
Committee shall determine.  Incentive
Stock Options may be granted only to eligible Employees of the Company or of
any parent corporation or subsidiary corporation (as permitted by Section 422
of the Code).

(b)           Award Agreement.  Each Option granted under the Plan shall be
evidenced by an Award Agreement.  The Award
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option or a Nonstatutory Stock Option.

(i)            Exercise Price.  The purchase price per share of Common Stock
that may be purchased by an Option shall be determined by the Committee; provided, however, and except with respect
to Substitute Awards or as provided in Section 14, that such purchase price
shall not be less than 100% of the Fair Market Value of a share of Common Stock
on the date of grant of such Option.

(ii)           Term.  The term of each Option shall not exceed ten
(10) years from the date of grant.

(iii)            Vesting; Restrictions on Exercise.  The Award Agreement shall set forth any
installment or other restrictions on exercise of the Option during the term of
the Option.  Each Option shall become
exercisable and shall vest over such period of time, or upon such events or
such Performance Criteria, as determined by the Committee.

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(iv)          Time and Method of Exercise.  The Committee shall establish in the
applicable Award Agreement the time or times at which an Option may be
exercised in whole or in part, and the method or methods by which, and the form
or forms, including, without limitation, cash, shares of Common Stock, or other
Awards or any combination thereof, having a Fair Market Value on the exercise
date equal to the relevant exercise price, in which payment of the exercise
price with respect thereto may be made or deemed to have been made.

(v)           Termination of
Continuous Service.  Each
Award Agreement shall set forth the extent, if any, to which the Participant
shall have the right to exercise the Option following termination of the
Participant’s Continuous Service.  Such
provisions shall be determined in the sole discretion of the Committee, need
not be uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Continuous Service. In the
absence of specific provisions in an Award Agreement setting forth rights to
exercise following termination of a Participant’s Continuous Service, the
following shall apply:

(A)          Termination of Continuous Service Other than as a
Result of Disability or Death. 
In the event a Participant’s Continuous Service terminates (other than
upon the Participant’s death or disability), the Participant may exercise his
or her Option (to the extent that the Participant was entitled to exercise it
as of the date of termination) but only within such period of time ending on
the earlier of (a) the date three (3) months after the termination of the Participant’s
Continuous Status as an Employee, Director or Consultant (or such longer or
shorter period specified in the Option Agreement), or (b) the expiration of the
term of the Option as set forth in the Option Agreement.  If, at the date of termination, the
Participant is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. 
If, after termination, the Participant does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

(B)           Disability of a Participant.  In the event a Participant’s Continuous
Service terminates as a result of the Participant’s disability, the Participant
may exercise his or her Option (to the extent that the Participant was entitled
to exercise it as of the date of termination), but only within such period of
time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement.  If, at the date of
termination, the Participant is not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan.  If, after termination, the Participant does
not exercise his or her Option within the time specified herein, the Option
shall terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.

(C)           Death of a Participant.  In
the event of the death of a Participant during, or within a period specified in
the Option Agreement after the termination of, the Participant’s Continuous
Service, the Option may be exercised (to the extent the Participant was
entitled to exercise the Option as of the date of death) by the Participant’s
estate, by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the
Participant’s death pursuant to subsection 15(b), but only within the period
ending on the earlier of (1) the date eighteen (18) months following the date
of death (or such longer or shorter period specified in the Option Agreement),
or (2) the expiration of the term of such Option as set forth in the Option
Agreement.  If, at the time of death, the
Participant was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. 
If, after death, the Option is not exercised within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.

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(c)           Limitations on Incentive Stock Options.

(i)             Initial Exercise.  The aggregate Fair Market Value of the shares
of Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by a Participant in any calendar year, under the Plan or
otherwise, shall not exceed $100,000. 
For this purpose, the Fair Market Value of the shares of Common Stock
shall be determined as of the date of grant and each Incentive Stock Option
shall be taken into account in the order granted.

(ii)            Ten Percent Stockholders.  An Incentive Stock Option granted to a
Participant who is the holder of record of more than ten percent (10%) of the
combined voting power of all classes of stock of the Company shall have an
exercise price at least equal to 110% of the Fair Market Value of a share of
Common Stock on the date of grant and the term of the Option shall not exceed
five (5) years.

(iii)           Notification of Disqualifying
Disposition.  If any
Participant shall make any disposition of shares of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), the Participant shall notify the Company of such disposition
within ten (10) days thereof.

7.             STOCK APPRECIATION
RIGHTS

(a)           Grant of Stock Appreciation Rights.  The Committee is hereby authorized to grant
Stock Appreciation Rights to Participants. 
Subject to the terms of the Plan and any applicable Award Agreement, a
Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the Fair
Market Value of a share of Common Stock on the date of exercise over (ii) the
grant price of the Stock Appreciation Right as specified by the Committee.

(b)           Award Agreement.  Each Stock Appreciation Right granted under
the Plan shall be evidenced by an Award Agreement.

(i)            Grant Price.  The grant price shall be determined by the
Committee; provided, however, and
except as provided in Section 14, that such price shall not be less than 100%
of the Fair Market Value of one share of Common Stock on the date of grant,
except that if a Stock Appreciation Right is at any time granted in tandem with
an Option, the grant price of the Stock Appreciation Right shall not be less
than the exercise price of such Option.

(ii)           Term. The term of
each Stock Appreciation Right shall not exceed ten (10) years from the date of
grant.

(iii)          Time and Method of Exercise.  The Committee shall establish in the
applicable Award Agreement the time or times at which a Stock Appreciation
Right may be exercised in whole or in part. 
At the discretion of the Committee, the payment upon exercise may be in
cash, shares of Common Stock or any combination thereof, or in any other manner
approved by the Committee in its sole discretion.  The Committee’s determination as to the form
of settlement shall be set forth in the Award Agreement.

(iv)          Termination of Continuous Service.  Each Award Agreement shall set forth the
extent, if any, to which the Participant shall have the right to exercise the
Stock Appreciation Right following termination of the Participant’s Continuous
Service.  Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among
all Stock Appreciation Rights issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Continuous Service.

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8.             RESTRICTED STOCK AND
RESTRICTED STOCK UNITS

(a)           Grant of Restricted Stock or
Restricted Stock Units.  The Committee is hereby authorized to grant
Awards of Restricted Stock and Restricted Stock Units to Participants.

(b)           Award Agreement.  Each grant of Restricted Stock or Restricted
Stock Units shall be evidenced by an Award Agreement.

(i)            Restrictions on Transfer.  Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may
establish in the applicable Award Agreement (including, without limitation, any
limitation on the right to vote a share of Restricted Stock or the right to receive
any dividend or other right), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise, as the
Committee may deem appropriate. 
Unrestricted shares of Common Stock, evidenced in such manner as the
Committee shall deem appropriate, shall be delivered to the holder of
Restricted Stock promptly after such restrictions have lapsed.

(ii)           Share Registration.  Any Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates.  In the
event any stock certificate is issued in respect of shares of Restricted Stock
granted under the Plan, such certificate shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock.

(iii)          Forfeiture.  Upon termination of Continuous
Service during the restriction period, except as determined otherwise by the
Committee, all shares of Restricted Stock and all Restricted Stock Units that
are then subject to restrictions shall be forfeited and reacquired by the
Company.

9.             PERFORMANCE AWARDS

(a)           Grant of Performance Awards.  The Committee is hereby authorized to grant
Performance Awards to Participants. 
Performance Awards include arrangements under which the grant, issuance,
retention, vesting and/or transferability of any Award is subject to such
Performance Criteria and such additional conditions or terms as the Committee
may designate.

(b)           Award Agreement.  Each grant of a Performance Award shall be
evidenced by an Award Agreement.  Subject
to the terms of the Plan and any applicable Award Agreement, a Performance
Award granted under the Plan:

(i)            may be denominated or
payable in cash, shares of Common Stock (including, without limitation,
Restricted Stock), other securities, or other Awards; and

(ii)           shall confer on the
holder thereof rights valued as determined by the Committee and payable to, or
exercisable by, the holder of the Performance Award, in whole or in part, upon
the achievement of such performance goals during such Performance Periods as
the Committee shall establish.

(c)           Covered Employee. The
Committee may from time to time grant Awards to Covered Employees that are
intended to satisfy the performance-based compensation requirements of Section
162(m) of the Code.  For purposes of such
Awards, the Committee shall consider all of the requirements of Section 162(m),
including the Qualifying Performance Criteria, approvals and certification by
solely 

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outside directors, the individual Award limits and any other
requirements under Section 162(m) of the Code.

10.          OTHER STOCK-BASED AWARDS

The
Committee is hereby authorized to grant to Participants such other Awards that
are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of Common Stock, as are deemed by the
Committee to be consistent with the purposes of the Plan, provided,
however, that such grants must comply with applicable law.  Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the terms and
conditions of such Awards.  Shares of
Common Stock or other securities delivered pursuant to a purchase right granted
under this Section 10 shall be purchased for such consideration, which may be
paid by such method or methods and in such form or forms, including, without
limitation, cash, shares of Common Stock, other securities, or other Awards, or
any combination thereof, as the Committee shall determine.

11.          DIVIDEND EQUIVALENTS

The
Committee is hereby authorized to grant to Participants the right, if so
determined by the Committee, to receive, currently, or on a deferred basis,
dividends or Dividend Equivalents, with respect to the shares of Common Stock
covered by the Award.  The Committee may
provide that any dividends paid on shares of Common Stock subject to an Award
must be reinvested in additional shares of Common Stock, which may or may not
be subject to the same vesting conditions and restrictions applicable to the
Award.  Notwithstanding the award of
Dividend Equivalents or dividends, a Participant shall not be entitled to
receive a special or extraordinary dividend or distribution unless the
Committee shall have expressly authorized such receipt.  All distributions, if any, received by a
Participant with respect to an Award as a result of any split, Common Stock
dividend, combination of shares of Common Stock, or other similar transaction
shall be subject to the restrictions applicable to the original Award.

12.          TAX WITHHOLDING

The
Company or any Affiliate shall be authorized to withhold from any Award granted
or any payment due or transfer made under any Award or under the Plan the
amount (in cash, shares of Common Stock, other securities, or other Awards) of
withholding taxes due in respect of an Award, its exercise, or any payment or
transfer under such Award or under the Plan and to take such other action as
may be necessary in the opinion of the Company or Affiliate to satisfy
statutory withholding obligations for the payment of such taxes.

13.          CANCELLATION AND
RE-GRANT OF OPTIONS

(a)           The
Board or the Committee shall have the authority to effect, at any time and from
time to time (i) the repricing of any outstanding Options under the Plan and/or
(ii) with the consent of the affected holders of Options, the cancellation of
any outstanding Options and the grant in substitution therefor of new Options
under the Plan covering the same or different numbers of shares of Common Stock,
but having an exercise price per share not less than 100% of the Fair Market
Value, or, in the case of a ten percent (10%) stockholder (as defined in
subsection 6(c)), not less than 110% of the Fair Market Value) per share of
Common Stock on the new grant date.

(b)           Prior
to the implementation of any such repricing or cancellation of one or more
outstanding Options as described in Section 13(c), the Board shall obtain the
approval of the stockholders of the Company to the extent required by the New
York Stock Exchange, Nasdaq or other securities exchange listing requirements
applicable to the Company, or applicable law.

 10
 

(c)           To
the extent required by Section 162(m) of the Code, shares subject to an Option
canceled under this Section 13 shall continue to be counted against the maximum
award of Options permitted to be granted during any calendar year to an
individual Participant pursuant to Section 4(b) of the Plan.  The repricing of an Option hereunder
resulting in a reduction of the exercise price shall be deemed to be a
cancellation of the original Option and the grant of a new Option; in the event
of such repricing, both the original and the new Options shall be counted
against the maximum awards of Options permitted to be granted during any
calendar year to an individual Participant pursuant to Section 4(b) of the
Plan.  The provisions of this Section
13(c) shall be applicable only to the extent required by Section 162(m) of the
Code.

14.           ADJUSTMENTS UPON
CHANGES IN STOCK

(a)           Changes in Capital.  If any change is made in the
Common Stock subject to the Plan, or subject to any Award, without the receipt
of consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the maximum number of shares subject to award to any person during any calendar
year, and the outstanding Awards will be appropriately adjusted in the
class(es) and number of shares and price per share of stock subject to such
outstanding Awards.  Such adjustments
shall be made by the Committee proportionately, so as to put the Participant in
the same economic position both prior to and after the change in capital.  The determination of the Committee shall be
final, binding and conclusive.  (The
conversion of any convertible securities of the Company shall not be treated as
a “transaction not involving the receipt of consideration by the Company.”)

(b)           Change of Control.  In the event of a Change of
Control, to the extent permitted by applicable law: (i) any surviving
corporation (or an Affiliate thereof), shall assume any Awards outstanding
under the Plan or shall substitute similar Awards for those outstanding under
the Plan and (ii) such Awards shall continue in full force and
effect.  In the event any surviving
corporation (or an Affiliate) refuses to assume or continue such Awards, or to
substitute similar Awards for those outstanding under the Plan, then vesting
(or release from the repurchase option) shall accelerate such that such Awards
are fully vested at such event and shall be exercisable for a period of 15 days
after notice from the Company.  If not so
exercised within the 15 day period, then such Awards shall be terminated.

15.           GENERAL PROVISIONS

(a)           
Forms of Payment for
Awards.  Subject to the
terms of the Plan and any applicable Award Agreement, payments or transfers to
be made by the Company or an Affiliate upon the grant, exercise, or payment of
an Award may be made in such form or forms as the Committee shall determine,
including, without limitation, cash, shares of Common Stock, rights in or
shares issuable under the Award or other Awards, other securities, or other
Awards or any combination thereof, and may be in a single payment or transfer,
in installments, or on a deferred basis, in each case in accordance with the
rules and procedures established by the Committee.  Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments.

(b)           Limits on Transfer of Awards.  Except as provided by the Committee, no Award,
and no right under any such Award, shall be assignable, alienable, saleable, or
transferable by a Participant otherwise than by will or by the laws of descent
and distribution; provided, however, that, if so
determined by the Committee, a Participant may, in the manner established by
the Committee, designate a beneficiary or beneficiaries to exercise the rights
of the Participant with respect to any Award upon the 

 11
 

death of a Participant.  Each
Award, and each right under any Award, shall be exercisable, during the
Participant’s lifetime, only by the Participant or, if permissible under
applicable law, by the Participant’s guardian or legal representative.  No Award, and no right under any such Award,
may be pledged, alienated, attached, or otherwise encumbered, and any purported
pledge, alienation, attachment, or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

(c)           Conditions and Restrictions Upon
Securities Subject to Awards. 
The Committee may provide that the shares of Common Stock issued upon
exercise of an Option or Stock Appreciation Right or otherwise subject to or
issued under an Award shall be subject to such further agreements, restrictions,
conditions or limitations as the Committee in its discretion may specify prior
to the exercise of such Option or Stock Appreciation Right or the grant,
vesting or settlement of such Award, including without limitation, conditions
on vesting or transferability and forfeiture or repurchase provisions or
provisions on payment of taxes arising in connection with an Award.  Without limiting the foregoing, such
restrictions may address the timing and manner of any resales by the Participant
or other subsequent transfers by the Participant of any shares of Common Stock
issued under an Award, including without limitation: (i) restrictions under an
insider trading policy or pursuant to applicable law; (ii) restrictions
designed to delay and/or coordinate the timing and manner of sales by
Participant and holders of other Company equity compensation arrangements;
(iii) restrictions as to the use of a specified brokerage firm for such resales
or other transfers; and (iv) provisions requiring shares to be sold on the open
market or to the Company in order to satisfy tax withholding or other
obligations.

(d)           Share Certificates.  All shares or other securities delivered
under the Plan pursuant to any Award or the exercise thereof shall be subject
to such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange upon which such
shares of Common Stock or other securities are then listed, and any applicable
Federal, state, or local securities laws, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.  Notwithstanding any
other provision of this Plan to the contrary, the Company may elect to satisfy
any requirement under this Plan for the registration or delivery of stock
certificates through the use of book-entry registration.

(e)           
Changes in Accounting or
Tax Rules.  Except as
provided otherwise at the time an Award is granted, notwithstanding any other
provision of the Plan to the contrary, if, during the term of the Plan, any
changes in the financial or tax accounting rules applicable to any Award shall
occur which, in the sole judgment of the Committee, may have a material adverse
effect on the reported earnings, assets or liabilities of the Company, the
Committee shall have the right and power to modify, as necessary, any then
outstanding and unexercised Options, Stock Appreciation Rights and other
outstanding Awards as to which the applicable services or other restrictions
have not been satisfied.

(f)            Nonexclusivity of the Plan.  The adoption of the Plan shall not be
construed as creating any limitations upon the right and authority of the
Committee to adopt such other incentive compensation arrangements (which
arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or particular
individuals) as the Committee in its discretion determines desirable.

(g)           Other Award Agreement Provisions.  Each Award Agreement may contain such other
terms and conditions not inconsistent with the Plan as may be determined by the
Committee, in its sole discretion.

(h)           Other Employee Benefits.  The amount of any compensation deemed to be
received by a Participant as a result of the exercise of an Option or Stock
Appreciation Right, the sale of shares received upon such exercise, the vesting
of any Restricted Stock, receipt of Performance Shares, distributions with respect
to Restricted Stock Units, Performance Awards, or Other Stock-Based Awards 

 12
 

shall not constitute “earnings” or “compensation” with respect to which
any other employee benefits of such employee are determined, including without
limitation, benefits under any pension, profit sharing, 401(k), life insurance
or salary continuation plan.

(i)            Severability.  If any provision of the Plan or any Award
Agreement shall be determined to be illegal or unenforceable by any court of
law in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.

(j)            Governing Law.  The validity and construction of this Plan
and the Award Agreements shall be construed in accordance with and governed by
the laws of the State of Delaware other than any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation of
this Plan and the Award Agreements to the substantive laws of any other
jurisdiction.

(k)           Section 409A.  Notwithstanding anything in this Plan to the
contrary, the Plan and Awards made under the Plan are intended to comply with
the requirements imposed by Section 409A of the Code.  If any Plan provision or Award under the Plan
would result in the imposition of an additional tax under Section 409A of the
Code, the Company and the Participant intend that the Plan provision or Award
will be reformed to avoid imposition, to the extent possible, of the applicable
tax and no action taken to comply with Section 409A of the Code shall be deemed
to adversely affect the Participant’s rights to an Award.  The Participant further agrees that the
Committee, in the exercise of its sole discretion and without the consent of
the Participant, may amend or modify an Award in any manner and delay the
payment of any amounts payable pursuant to an Award to the minimum extent
necessary to meet the requirements of Section 409A of the Code as the Committee
deems appropriate or desirable.

(l)            Stockholder Rights.  No Participant nor any other holder of an
Award granted under the Plan shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such Award
unless and until such person has satisfied all requirements for exercise of the
Award or lapse of restrictions pursuant to its terms.

16.          AMENDMENT, MODIFICATION
AND TERMINATION

(a)           Amendment, Modification, and
Termination.  Subject to
Sections 3, 15(k) and 16(b), the Board may at any time terminate, and from time
to time may amend or modify, the Plan; provided, however,
that no amendment or modification may become effective without approval of the
stockholders of the Company if stockholder approval is required to enable the
Plan to satisfy any applicable statutory or regulatory requirements, or if the
Company, on the advice of counsel, determines that stockholder approval is
otherwise necessary or desirable.

(b)           Awards Previously Granted.  Except as otherwise may be required under
Section 15(k), notwithstanding Section 16(a), to the contrary, no amendment,
modification or termination of the Plan or Award Agreement shall adversely
affect in any material way any previously granted Award, without the written
consent of the Participant holding such Award.

17.          STOCKHOLDER APPROVAL;
EFFECTIVE DATE OF PLAN

The
Plan shall be effective immediately upon approval by the stockholders.  Unless sooner terminated by the Board, this
Plan shall terminate automatically on March 11, 2017.  After the Plan is terminated, no Awards may
be granted.  Awards outstanding at the
time the Plan is terminated shall remain outstanding in accordance with the
terms and conditions of the Plan and the Award Agreement.

 13EXHIBIT
10.4

MEDICALCV, INC.

AMENDED AND RESTATED 2001 EQUITY INCENTIVE PLAN

(As Amended on April 20, 2007)

SECTION 1

DEFINED TERMS

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

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

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

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

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

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

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

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

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

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

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

 1
 

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

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

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

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

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

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

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

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

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

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

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

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

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

 2
 

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

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

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

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

SECTION 2

PURPOSE

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

SECTION 3

PARTICIPATION

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

SECTION 4

STOCK OPTIONS

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

 3
 

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

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

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

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

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

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

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

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

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

 4
 

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

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

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

SECTION 5

PERFORMANCE AWARDS AND PERFORMANCE SHARES

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

 5
 

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

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

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

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

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

 6
 

SECTION 6

RESTRICTED STOCK

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

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

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

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

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

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

SECTION 7

TAX OFFSET PAYMENTS

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

 7
 

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

SECTION 8

OPERATION AND ADMINISTRATION

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

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

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

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

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

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

 8
 

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

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

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

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

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

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

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

 9
 

8.5           Tax Matters.

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

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

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

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

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

 10
 

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

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

8.10         Limitation of Implied
Rights.

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

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

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

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

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

 11
 

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

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

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

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

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

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

 12
 

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

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

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

SECTION 9

CHANGE IN CONTROL

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

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

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

 13
 

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

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

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

SECTION 10

COMMITTEE

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

 14
 

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

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

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

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

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

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

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

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

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

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

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

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

 15
 

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

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

SECTION 11

AMENDMENT AND TERMINATION

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

SECTION 12

GENERAL PROVISIONS

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

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

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

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

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

 16
 

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

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

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

 17

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