Document:

EXHIBIT
10.2

 

EMPLOYMENT
AGREEMENT

 

THIS AGREEMENT (“Agreement”) is entered into as of
August 22, 2003 by and between MedAmicus, Inc., a Minnesota corporation
(the “Company”), and James Mellor (“Employee”) and will become effective on the
Effective Date, as defined in Section 1.

 

WHEREAS, Employee is currently employed as the Senior
Vice President, Sales and Marketing, of BIOMEC Cardiovascular Inc. (“BCI”), and
the Company has entered into an Asset Purchase Agreement among the Company,
Medacquisition, Inc., BIOMEC Inc. and BCI dated as of July 21, 2003 (the
“Asset Purchase Agreement”), under which the Company has agreed to purchase the
operating assets of BCI if certain conditions are met; and

 

WHEREAS, the Company wishes Employee to render
services for the Company beginning on the Effective Date and subject to the
terms and conditions set forth in this Agreement, and Employee wishes to be
retained and employed by the Company subject to these terms and conditions; and

 

WHEREAS, Employee understands that Company is offering
him employment in a position of trust and confidence and that he will generate,
have access to, and become familiar with confidential information; and

 

WHEREAS, Employee understands that the Company has
expended significant time and money on the development of customer goodwill and
a sound business reputation, and as part of Employee’s duties, he will develop
and maintain close working relationships with the Company’s customers; and

 

WHEREAS, Employee understands that this Agreement
prohibits the unauthorized use or disclosure of the Company’s confidential
information and an obligation not to compete with the Company.

 

NOW, THEREFORE, in consideration of the promises and
the respective undertakings of the Company and Employee set forth in this
Agreement, the Company and Employee agree as follows:

 

1.                                       Effective
Date.  The “Effective Date” means
the date immediately following the Closing Date, as defined in the Asset
Purchase Agreement.  This Agreement will
be null and void and of no force or effect if the Closing (as defined in the
Asset Purchase Agreement) does not occur.

 

2.                                       Employment.  The Company employs Employee as of the
Effective Date, and Employee accepts such employment as Senior Vice President,
Sales and Marketing, of Medacquisition, Inc. (to be renamed with input from
Employee), subject to the terms and conditions set forth in this Agreement.

 

 

3.                                       Term.  Subject to Employee’s full compliance with
section 4 and subject to the provisions of section 9, Employee’s
employment under this Agreement will continue for an initial term from the
Effective Date until December 31, 2004 (the “Initial Term”).  After the Initial Term, Employee’s
employment will continue on an at will basis, and either party may terminate
this Agreement with or without Cause (as defined in Section 9) on 30 days
prior written notice.  Termination of
this Agreement by either party will automatically terminate Employee’s
employment by the Company.

 

4.                                       Position
and Duties.

 

4.1.                              Service
with Company.  Employee agrees to perform
all reasonable employment duties for the Company as arise during the term of
this Agreement.  Employee will devote
his full time and attention and best efforts to the business and affairs of the
Company, and faithfully and diligently perform in a competent and professional
manner and to the best of his ability all of his duties and responsibilities
described in this Agreement.

 

4.2.                              Conflict
of Interest.  Employee represents
and warrants to the Company that he has no contractual commitments inconsistent
with his obligations set forth in this Agreement, and that during the term of
this Agreement, he will not render or perform services for any other
corporation, firm, entity, or person which are inconsistent with the provisions
of this Agreement and which are not authorized by the Company.

 

5.                                       Compensation.

 

5.1.                              Base
Salary.  As compensation for all
services to be rendered by Employee under this Agreement, the Company will pay
to Employee a Base Salary (“Base Salary” means regular cash compensation paid on
a periodic basis exclusive of benefits, bonuses or incentive payments) at an
annual rate of $150,000.  The Company
will pay the Base Salary in accordance with normal Company payroll practices
for employees, subject to state and federal taxes, social security, and any
other applicable withholdings.  The Base
Salary will be reviewed not less often than annually, and increased or
decreased as may be determined from time to time by the Company.

 

5.2.                              Stock
Options.  Employee will be eligible
after 90 days of employment with the Company to receive stock options to
purchase 30,000 shares of the Company’s common stock under the Company’s Stock
Option Incentive Plan, subject to approval by the Company’s Board of Directors.

 

5.3.                              Bonus
and Incentive.  Employee will be
eligible to participate in the Company’s “2004 Salaried Employee Bonus Plan”,
if and when adopted by the Board of Directors. 
The Company does not guarantee the adoption of any employee bonus
program during the term of this Agreement, and Employee’s participation in the
plan or program would be subject to the provisions, rules and regulations
applicable in the plan, and the terms of this Agreement.  The amount and criteria for determination of
Employee’s bonus and incentive compensation in the plan or program (if any) is
solely within the discretion of the Board of Directors.

 

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5.4.                              Benefits.  In addition to the compensation payable to
Employee as provided in this Section 5:

 

(a)                                  Vacation
and Holidays.  The Company will
honor any accrued but unused paid vacation earned during the Employee’s
employment with BIOMEC Cardiovascular Inc. 
Such paid vacation must be used by Employee according to the Company’s
existing policies regarding vacation time. 
Employee is eligible for three (3) weeks of paid vacation to accrue
annually beginning on the Effective Date of this Agreement.  Employee may rollover up to two hundred
(200) hours of unused vacation into the next calendar year.  Employee shall also be entitled to eighty
(80) hours of paid holidays each calendar year per the Company’s Holiday
Schedule.

 

(b)                                 Group
Health Insurance and Pension Plan. 
To the extent available or offered, Employee will be entitled to
participate in all other benefit programs offered by the Company to its
employees, subject to terms of the benefit plans as the Board of Directors may
approve, including but not limited to, any medical, dental or other health
plan, pension plan, profit-sharing plan and life insurance plan that the Company
may adopt or maintain, any of which may be changed, terminated or eliminated by
the Company at any time in the exclusive discretion of the Board of
Directors.  The Company will attempt to
give credit for prior service earned with BIOMEC Cardiovascular Inc. to the
extent permitted under the benefit plans.

 

5.5.                              Business
Expenses.  The Company will pay or
reimburse Employee for all reasonable and necessary out-of-pocket expenses
incurred by Employee for the benefit of the Company in the performance of his duties
under this Agreement, so long as Employee complies with the Company’s policies
for expense reimbursement.

 

6.                                       Confidential
Information.

 

6.1.                              “Confidential
Information” Defined.  “Confidential
information” means any information not generally known in this profession by
third parties, including the Company’s competitors or the general public.  It includes (but is not limited to) methods,
procedures, trade secrets, client lists, marketing plans and techniques, new
products and new product development, strategic plans, business plans, budgets,
product prices, sales volume, information about clients and potential clients
(including identities of the clients and the clients’ contact person(s), the
clients’ buying history and tendencies and other details about the Company’s
relationship with them), drawings, specifications, reports and information
about employee compensation and finances. 
All information which Employee acquires or becomes acquainted with
during the period of his employment by the Company (including employment by an
affiliated company), whether developed by Employee or by others, which he has a
reasonable basis to believe to be Confidential Information, or which is treated
by the Company as being Confidential Information, shall be presumed to be
Confidential Information.

 

6.2.                              Obligations
of Employee.  Except to the extent
required during the course of Employee’s employment for the Company, Employee
agrees that he will not, during or after

 

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the term of his employment, disclose Confidential Information to any
other person or entity, or use the Company Confidential Information for his own
benefit or for the benefit of another, unless the Company expressly directs him
to do so.  Employee acknowledges that
the Confidential Information constitutes a unique and valuable asset of the
Company and represents a substantial investment of time and expense by the
Company and its predecessors, and that any disclosure or other use of such
Confidential Information other than for the sole benefit of the Company would
seriously harm the Company’s business and cause monetary loss that would be
difficult, if not impossible, to measure.

 

7.                                       Non-competition
and Non-solicitation.  In
consideration of employment, Employee agrees to the following:

 

7.1.                              Non-competition.  During Employee’s employment with the
Company, Employee will devote his full time and energy to furthering Company
business and will not become affiliated in any capacity with any individual or
entities who are competing or planning to compete with the Company at that
time.  For a period of one year after
the termination of Employee’s employment (whether voluntary or involuntary),
Employee will not directly or indirectly solicit, offer to provide, or provide
any services on behalf of or to any of the entities listed on Appendix A
or any other party engaged in the development, manufacturing, marketing or sale
of epicardial leads, adapters, introducers or other lead delivery systems
related to cardiac rhythm management, except with the Company’s written
consent.

 

7.2.                              Non-solicitation.  Employee further agrees that he will not,
during the term of his employment or for a period of one year following the
termination of his employment, directly or indirectly solicit any of the
Company’s employees or independent contractors for the purpose of hiring them
to work for him or another person, entity or employer, or for the purpose of
inducing them to leave their employment with the Company, without the Company’s
written consent.

 

8.                                       Inventions.  During Employee’s employment with the
Company, Employee will promptly disclose to the Company in writing any ideas,
inventions or discoveries (collectively known as “inventions”) related to the
Company’s business.  Employee agrees
that these inventions belong to the Company, and agree to assign or offer to
assign to the Company all rights, title and interest in such inventions, and
will cooperate in the Company’s efforts to protect the Company’s rights to
them.  Employee understands that this
Agreement does not apply to any invention for which none of the Company’s
equipment, supplies, facility or trade secret information was used and which
was developed entirely on Employee’s own time, and (1) which does not relate
(a) directly to Company business, or (b) to the Company’s actual or
demonstrably anticipated research or development, or (2) which does not result
from any work that Employee performed for the Company.

 

9.                                       Termination.

 

9.1.                              Grounds
for Termination.  This Agreement may
be terminated prior to the expiration of the Initial Term set forth in
section 3, if:

 

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(a)                       the Company
elects to terminate this Agreement for “Cause” (as defined in Section 9.2)
and notifies Employee in writing;

(b)                      Employee
becomes “disabled” (as defined in Section 9.3); or

(c)                       Employee
dies.

 

Termination under events 9.1 (a) through (c) will be effective
immediately and Employee shall be entitled to receive compensation due to the
Employee through the last day of employment. 
After the Initial Term, in addition to the reasons set forth in 9.1 (a),
(b) and (c), this Agreement may be terminated if:

 

(d)                      Employee
elects to terminate this Agreement and gives thirty (30) days notice, or

(e)                       the Company
elects to terminate this Agreement without Cause and gives thirty (30) days
notice.

 

If this Agreement is terminated by Employee under 9.1 (d), Employee
shall receive compensation through the end of the 30-day notice period.  If the Company terminates this Agreement
under 9.1 (e), the Company will pay Employee a severance equal to four months
of Employee’s annual Base Salary in effect as of the date of termination.  The severance will be paid in equal
semi-monthly payments in accordance with the Company’s general payroll
practices for employees, subject to all appropriate withholdings for state,
federal and local taxes, and such other deductions as are otherwise required by
law or authorized by Employee.  The
Company will not be obligated to pay Employee severance if Employee breaches
those provisions that Employee remains bound by after the date of termination,
specifically including Sections 6, 7 and 8 of this Agreement.

 

9.2.                              “Cause”
Defined.  As used in this Agreement,
“Cause” means Employee has: (a) breached the provisions of sections 6, 7 or 8
of this Agreement in any respect or materially breached any other provision of
this Agreement; (b) engaged in material misconduct, including material failure
to perform Employee’s duties as an employee of the Company; (c) committed
fraud, misappropriation or embezzlement in connection with the Company’s
business; (d) convicted or has pleaded nolo contendere to criminal misconduct
(except for parking violations, minor traffic violations, and other petty or
insignificant misdemeanors); or (e) use of narcotics, liquor or illicit drugs
has a detrimental effect on the performance of his employment responsibilities,
as determined by the Company.

 

9.3.                              “Disabled”
Defined.  As used in this Agreement,
“disabled” means any mental or physical condition which renders Employee unable
to perform the essential functions of his position, with or without reasonable
accommodation, as defined by various state and federal disability laws.  Employee will be presumed to be disabled if
Employee qualifies because of illness or incapacity, to begin receiving
disability income insurance payments under any long term disability income
insurance policy that the Company maintains for the benefit of Employee.  If there is no policy in effect at the date
of Employee’s illness or incapacity, Employee will be presumed to be disabled
for purposes of this Agreement if Employee is substantially incapable of
performing his duties for a period of more than twelve (12) consecutive weeks.

 

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9.4.                              Bound
by Provisions.  Despite any
termination of this Agreement, Employee, in consideration of his employment to
the date of termination will remain bound by the provisions of this Agreement
that specifically relate to periods, activities or obligations upon or
subsequent to the termination of Employee’s employment.

 

9.5.                              Surrender
of Records and Property.  If either
Employee or Company terminate Employee’s employment, Employee will deliver to
the Company immediately all records, documents or information he generated or
received in connection with his employment with the Company, including but not
limited to:  all originals and all
copies of any records, documents or information (whether in paper, computer or
other form) including drawings, specifications, reports, client lists,
financial information, or any confidential information as described in
Section 6.  Employee will at the
same time also deliver to the Company all other property he received in
connection with his employment with the Company, including but not limited to,
computer equipment, computer hard drives or diskettes, telephone equipment, and
facsimile machines.

 

10.                                 Settlement
of Disputes.

 

10.1.                        Resolution
of Certain Claims - Injunctive Relief. 
Claims brought by the Company asserting a violation of Sections 6, 7 or
8, or seeking to enforce, by injunction or otherwise, the terms of either
Sections 6, 7 or 8 may be maintained by the Company in a lawsuit subject to the
terms of Section 10.2.  Employee
agrees that, in addition to, but not to the exclusion of any other available
remedy, the Company has the right to enforce the provisions of Sections 6, 7 or
8 by applying for and obtaining temporary and permanent restraining orders or
injunctions from a court of competent jurisdiction without the necessity of
filing a bond, and the Company will be entitled to recover from Employee its
reasonable attorneys’ fees and costs in enforcing the provisions of Sections 6,
7 or 8 and will repay to the Company all profits, compensation, commissions or
other benefits which Employee has realized as a result of his violation.

 

10.2.                        Venue.  Any action at law, suit in equity, or
judicial proceeding arising directly, indirectly, or otherwise in connection
with, out of, related to or from this Agreement will be litigated only in the
courts of the state of Minnesota, County of Hennepin, or the Federal District
Court, District of Minnesota, Fourth Division. 
Employee waives any right Employee may have to transfer or change the
venue of any litigation brought against Employee by the Company.  Employee also waives any claim of
inconvenient forum.

 

10.3.                        Severability.  To the extent any provision of this
Agreement is held to be invalid or unenforceable, it will be considered deleted
therefrom and the remainder of the provision and of this Agreement will be
unaffected and will continue in full force and effect.  If the duration or geographical extent of,
or business activities covered by, any provision of this Agreement is in excess
of that which is valid and enforceable under applicable law, then the provision
will be construed to cover only that duration, geographical extent or business
activities that may be valid and enforceable under applicable law.  Employee acknowledges the uncertainty of the
law in this respect and expressly stipulates that this Agreement be given the

 

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construction which renders its provisions valid and enforceable to the
maximum extent (not exceeding its express terms possible under applicable law).

 

11.                                 Miscellaneous.

 

11.1.                        Governing
Law.  This Agreement is made under
and is governed by and construed in accordance with the laws of the state of
Minnesota, other than its laws dealing with conflicts of law principles.

 

11.2.                        Prior
Agreements.  This Agreement contains
the entire agreement of the parties relating to the employment of Employee by
the Company and the ancillary matters described in this Agreement and
supersedes all prior agreements and understandings with respect to those
matters.

 

11.3.                        Withholding
Taxes.  The Company may withhold
from any benefits payable under this Agreement all federal, state, city or
other taxes as may be required pursuant to any law or governmental regulation
or ruling.

 

11.4.                        Amendments.  No amendment or modification of this
Agreement will be deemed effective unless made in writing and signed by both
Employee and the Company.

 

11.5.                        No
Waiver.  No term or condition of
this Agreement will be deemed to have been waived, nor will there be any estoppel
to enforce any provision of this Agreement, except by a statement in writing
signed by the party against whom enforcement of the waiver or estoppel is
sought.  Any written waiver will not be
deemed a continuing waiver unless specifically stated, will operate only as to
the specific term or condition waived and will not constitute a waiver of the
term or condition for the future or as to any act other than that specifically
waived.

 

11.6.                        Assignment.  This Agreement may not be assigned, in whole
or in part, by Employee.

 

11.7.                        Counterparts.  This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
will constitute one and the same instrument.

 

11.8.                        Captions
and Headings.  The captions and paragraph
headings used in this Agreement are for convenience of reference only, and do
not affect the construction or interpretation of this Agreement.

 

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

 

	
   

  	
  MEDAMICUS, INC.

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Deborah
  Schuneman

  	
   

  
	
   

  	
   

  	
  Its:

  	
  HR Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
     /s/
  James E. Mellor

  	
   

  
	
   

  	
  JAMES MELLOR

  
						

 

8EXHIBIT 10.3

 

MEDAMICUS, INC. 1999 INCENTIVE STOCK OPTION PLAN

 

(as amended through October 23, 2003)

 

1.                                       Purpose.   The purpose of this Plan is to further the
growth and general prosperity of Medamicus, Inc., the Company, by enabling the
employees of the Company, who have been or will be given responsibility for the
affairs of the Company, to acquire shares of its common stock under the terms
and conditions and in the manner set forth by this Plan, increasing their
personal involvement in the Company and to enable the Company to obtain and
retain the services of those employees.

 

2.                                       Administration.  This Plan shall be administered by a
Committee of at least two (2) Directors who are disinterested administrators
within the meaning of Section 16 of the Securities Exchange Act of 1934
and the rules, regulations and interpretations promulgated thereunder.

 

Each option
granted will be evidenced by a written agreement (Stock Option Agreement) and a
document containing the terms and conditions of the Plan.

 

3.                                       Eligibility
and Participation.  Employees
eligible to receive options under the Plan shall be key personnel including
officers of the Company and directors who are also employees of the Company.
The Committee shall allot to such participant options to purchase shares as the
Committee shall from time to time determine: provided, however, that no
employee shall be allotted an option for any greater number of shares than
would result in him owning directly or indirectly, more than 10% of the total
combined voting power or value of the stock of the Company or any of its
subsidiaries unless the option price is at least 85% of the market value of the
stock on the date of grant, and the option is, by its terms, not exercisable
after six (6) years from the date of grant.

 

4.                                       Shares
Subject to Plan.  Subject to
adjustment as provided in Section 5, an aggregate of up to 900,000(1) shares of the Common Stock of the Company shall be
subject to the Plan and the Committee is authorized to grant options hereunder
with respect to such number of shares. Any unsold shares subject to an option
under the Plan which for any reason expires or otherwise terminates may again
be made subject to option under the Plan at the discretion of the Committee.

 

5.                                       Adjustments
Upon Changes in Capitalization.  In
the event of a merger, consolidation, reorganization, stock dividend, stock
split, or any other change in corporate structure or capitalization affecting
the Company’s common shares, appropriate adjustment shall be made in the
maximum number of shares available under the Plan or to any one individual and

 

(1)   The Plan originally authorized 400,000
shares of Common Shares for issuance. 
An amendment to the Plan to increase the number of shares under the Plan
by 300,000 was authorized by the Board on February 6, 2003 and approved by
the shareholders on April 24, 2003. 
An amendment to the Plan to increase the number of shares under the Plan
by 200,000 was authorized by the Board of Directors on July 21, 2003 and
approved by the shareholders on October 21, 2003.

 

 

in the number, kind, option,
price, etc. of shares subject to options granted under the Plan.

 

6.                                       Terms
and Conditions of Options.  The
Committee shall have power subject to the limitations contained in the Plan, to
prescribe any terms and conditions in respect to the granting or exercise of
any option under the Plan and in particular shall prescribe the following terms
and conditions:

 

(a)                                  Each
option shall state the number of shares to which it pertains.

 

(b)                                 Each
option shall be granted within ten years of the date the Plan is adopted.

 

(c)                                  Each
option shall be exercisable only within six years of the date of grant.

 

(d)                                 The
purchase price, which shall be at least 85% of the fair market value of the
shares at such time as the option is granted and shall not be less than the par
value of the shares sold.

 

(e)                                  An
option may be exercised at any time after the date of grant, subject to the
provisions of section 6(f) of the Plan and to such other terms and
conditions specified in the Stock Option Agreement, with respect to all or part
of the shares covered by the option. An option may not be exercised for
fractional shares of stock.

 

In the event the Company or the stockholders of the Company enter into
an agreement to dispose of all or substantially all of the assets or stock of
the Company by means of a sale, merger, reorganization, liquidation or
otherwise, an option shall become immediately exercisable with respect to the
full number of shares.

 

(f)                                    An option shall be
exercised when written notice of such exercise has been given to the Company at
its principle business office by the person entitled to exercise the option and
full payment for the shares has been received by the Company. Until the stock
certificates are issued, no right to vote, receive dividends, or any other
rights as a shareholder shall exist with respect to optioned shares,
notwithstanding the exercise of the option.

 

(g)                                 An
option may be exercised by the optionee only while he is, and has continually
been, since the date of the grant of the option, an employee of the Company or
within three months following termination of employment (for reasons other than
death, disability or termination for cause).

 

If the
continuous employment of an optionee terminates by reason of his death, options
which the deceased employee would be entitled to exercise as of the date of
death may be exercised within one year following the date of death by the
person to whom his rights under such option shall have passed by will or by the
laws of descent and distribution, but in no event later than the expiration of
the

 

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option.If the
continuous employment of an optionee terminates by reason of disability,
options which the disabled employee would be entitled to exercise as of the
date of termination of employment may be exercised within one year following
the date of termination, but in no event later than the expiration of the
option.

 

If the
continuous employment of an optionee terminates for cause, any options which
have not been exercised as of the date of termination shall be cancelled.

 

7.                                       Options
Not Transferable.  No option granted
under the Plan will be transferrable by the optionee, either voluntarily or
involuntarily, except by will or the laws of descent and distribution, and then
only to the extent provided in Section 6 hereof, or pursuant to a
qualified domestic relations order (as defined by the Internal Revenue Code of
1986, as amended, or Title I of the Employee Retirement Income Security Act and
the rules thereunder.)

 

8.                                       Amendment
or Termination of the Plan.  The
Board of Directors may amend the Plan from time to time as it deems advisable.
The Board of Directors may at any time terminate the Plan, provided that any
termination of the Plan shall not affect options already granted. The options
shall remain in full force and effect as if the Plan had not been terminated.

 

9.                                       Agreement
and Representation of Employee.  As
a condition to the exercise of any option or portion thereof, the Company may
require the person exercising the option to represent and warrant at the time
of any exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute the shares if in the option
of counsel for the Company such representation is required under the Securities
Act of 1933, or any other applicable law, regulation or rule of any
governmental agency.

 

In the event
legal counsel to the Company renders an opinion to the Company that shares for
options exercised pursuant to this Plan cannot be issued to the optionee
because such act would violate the applicable Federal or State securities law,
then and in that event, the optionee agrees that the Company shall not be
required to issue the shares to the optionee tendered to the Company upon
exercise of the option.

 

10.                                 Effectiveness
and Termination of the Plan.   The
Plan shall become effective upon adoption by the Board of Directors and shall
be subject to approval of the stockholders of Medamicus, Inc. within 12 months
of adoption. The Plan shall terminate on the earliest of:

 

(a)                                  the
date when all the common shares available under the Plan shall have been
acquired through exercising the options granted under the Plan,

 

(b)                                 August 1,
2009,

 

(c)                                  such
other date as the Board may determine.

 

11.                                 Form
of Option.  Options may be issued by
the execution of the Medamicus, Inc. form entitled “Stock Option Agreement.”

 

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