Document:

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                                                                    EXHIBIT 10.1

                                APPLIED EPI, INC.
                             1993 STOCK OPTION PLAN

         1.       Purpose. The purpose of the Applied Epi, Inc.1993 Stock Option
Plan is to promote the success of Applied Epi, Inc. (the "Corporation") and of
any subsidiary of the Corporation (a "Subsidiary") by facilitating the
employment and retention of key personnel and by furnishing continuing,
long-term incentive to officers and other key employees upon whose efforts the
success of the Corporation depends to a large degree. In addition, the Plan is
intended to provide key employees on whom rests the major responsibility for the
present and future success of the Corporation with an opportunity to acquire a
proprietary interest in the Corporation and thereby to develop a stronger
incentive to expend maximum effort for the continued success and growth of the
Corporation.

         2.       Definitions.  The following words and phrases as used herein
shall have the meanings set forth below:

         2.1      "Board" shall mean the Board of Directors of the Corporation.

         2.2      "Code" shall mean the Internal Revenue Code of 1986, as
amended.

         2.3      "Committee" shall mean the Compensation Committee of the
Board, if any, or such other committee of the Board as may be designated by the
Board, from time to time, for the purpose of administering this Plan as
contemplated by Article 4 hereof.

         2.4      "Common Stock" shall mean the common stock, $.01 par value, of
the Corporation.

         2.5      "Corporation" shall mean Applied Epi, Inc., a Minnesota
corporation.

         2.6      "Director" shall mean any member of the Board.

         2.7      "Fair Market Value" of a share of Common Stock on any given
date shall be determined by the Committee as follows:

                  (a) if the Common Stock is listed for trading on one or more
                  national securities exchanges (including the Nasdaq National
                  Market), the reported last sales price on the principal such
                  exchange on the date in question, or if the Common Stock shall
                  not have been traded on such exchange on such date, the
                  reported last sales price on such exchange on the first day
                  prior thereto on which the Common Stock was so traded; or

                  (b) if the Common Stock is not listed for trading on a
                  national securities exchange (including the Nasdaq National
                  Market) but is traded in the over-the-counter market
                  (including the Nasdaq Small Cap Market), the average of the
                  highest and lowest bid prices for such Common Stock on the
                  date in question, or if

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                  there are no such bid prices for such Common Stock on such
                  date, the average of the highest and lowest bid prices on the
                  first day prior thereto on which such prices existed; or

                  (c) if neither (a) nor (b) is applicable, by any means deemed
                  fair and reasonable by the Committee, which determination
                  shall be final and binding on all parties.

         2.8      "ISO" shall mean any stock option granted pursuant to this
Plan as an "incentive stock option" within the meaning of Section 422 of the
Code.

         2.9      "Non-Employee Director" shall mean a "Non-Employee Director"
within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of
1934.

         2.10     "NQO" shall mean any stock option granted pursuant to this
Plan which is not an ISO.

         2.11     "Option" shall mean any stock option granted pursuant to this
Plan, whether an ISO or an NQO.

         2.12     "Optionee" shall mean any person who is the holder of an
Option granted pursuant to this Plan.

         2.13     "Option Agreement" shall mean the Stock Option Agreement
entered into between the Corporation and an employee granted an Option
hereunder, evidencing the grant of the Option and setting forth the terms and
conditions applicable thereto.

         2.14     "Outside Director" shall mean a Director who: (a) is not a
current employee of the Corporation or any member of an affiliated group which
includes the Corporation; (b) is not a former employee of the Corporation who
receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year; (c) has not been an
officer of the Corporation; and (d) does not receive remuneration from the
Corporation, either directly or indirectly, in any capacity other than as a
Director, except as otherwise permitted under Code Section 162(m) and
regulations thereunder. For this purpose, remuneration includes any payment in
exchange for goods or services. This definition shall be further governed by the
provisions of Code Section 162(m) and regulations promulgated thereunder.

         2.15     "Plan" shall mean this 1993 Stock Option Plan of the
Corporation.

         2.16     "Subsidiary" shall mean any corporation which at the time
qualifies as a subsidiary of the Corporation under Section 424(f) of the Code.

         3.       Shares Available Under Plan. The number of shares which may
be issued pursuant to Options granted under this Plan shall not exceed 1,500,000
shares of the Common Stock of the Corporation; provided, however, that shares
which become available as a result of canceled, unexercised, lapsed or
terminated Options granted under this Plan shall be available for issuance

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pursuant to Options subsequently granted under this Plan. The shares issued upon
exercise of Options granted under this Plan may be authorized and unissued
shares or shares previously acquired or to be acquired by the Corporation.

         4.       Administration.

         4.1      The Plan shall be administered by the Board, or at the Board's
discretion, by a Committee appointed by the Board. The Committee shall consist
of at least two Directors, all of whom shall be Outside Directors and
Non-Employee Directors, who shall serve at the pleasure of the Board. Other than
references in this Section 4.1, references to the "Committee" in this Plan shall
be deemed to refer to the Board where the Board has not designated a Committee
to administer the Plan.

         4.2      The Committee shall have plenary authority, subject to
provisions of the Plan, to determine when and to whom Options will be granted,
the term of each Option, the number of shares covered by it, the participation
by the Optionee in other plans, and any other terms or conditions of each
Option. The Committee shall determine with respect to each grant of an Option
whether a participant shall receive an ISO or an NQO. The number of shares, the
term and the other terms and conditions of a particular kind of Option need not
be the same, even as to Options granted at the same time. The Committee's
recommendations regarding Option grants and terms and conditions thereof shall
be conclusive.

         4.3      The Committee shall have the sole responsibility for
construing and interpreting the Plan, for establishing and amending any rules
and regulations as it deems necessary or desirable for the proper administration
of the Plan, and for resolving all questions arising under the Plan. Any
decision or action taken by the Committee arising out of or about the
construction, administration, interpretation and effect of the Plan and of its
rules and regulations shall, to the extent permitted by law, be within its
absolute discretion, except as otherwise specifically provided herein, and shall
be conclusive and binding on all Optionees, all successors, and any other
person, whether that person is claiming under or through any Optionee or
otherwise.

         4.4      No member of the Committee shall be liable, in the absence of
bad faith, for any act or omission with respect to his services on the
Committee. Service on the Committee shall constitute service as a member of the
Board, so that the members of the Committee shall be entitled to indemnification
and reimbursement as Board members pursuant to its Bylaws.

         4.5      The Committee shall regularly inform the Board as to its
actions with respect to all Options granted under the Plan and the terms and
conditions and any such Options in a manner, at any times, and in any form as
the Board may reasonably request.

         5.       Participants.

         5.1      Participation in this Plan shall be limited to key personnel
of the Corporation or of a Subsidiary, who are salaried employees of the
Corporation or of a Subsidiary.

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         5.2      Subject to other provisions of this Plan, Options may be
granted to the same participants on more than one occasion.

         5.3      The Committee's determination under the Plan, including,
without limitation, determination of the persons to receive Options, the form,
amount and type of such Options, and the terms and provisions of Options need
not be uniform and may be made selectively among otherwise eligible
participants, whether or not the participants are similarly situated.

         6.       Terms and Conditions.

         6.1      Each Option granted under the Plan shall be evidenced by a
written agreement, which shall be subject to the provisions of this Plan and to
such other terms and conditions as the Corporation may deem appropriate.

         6.2      The term of each Option shall be fixed by the Committee and
shall be specified in each Option Agreement, but no ISO shall be exercisable
more than ten years after the date the Option is granted. The term of any ISO
granted to an Optionee that owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the combined voting power of all classes of stock of the Corporation or any
Subsidiary, shall be no more than five years from the date of grant.

         6.3      The exercise price per share shall be determined by the
Committee at the time any Option is granted and shall be determined as follows:

                  (a) For employees who do not own (and are not deemed to own by
                  reason of the attribution rules of Section 424(d) of the Code)
                  stock possessing more than ten percent (10%) of the total
                  combined voting power of all classes of stock of the
                  Corporation or of any Subsidiary, the ISO exercise price per
                  share shall not be less than one hundred percent (100%) of
                  Fair Market Value of the underlying Common Stock on the date
                  the Option is granted, as determined by the Committee.

                  (b) For employees who own (or who are deemed to own by reason
                  of the attribution rules of Section 424(d) of the Code), stock
                  possessing more than ten percent (10%) of the total combined
                  voting power of all classes of stock of the Corporation or of
                  any Subsidiary, the ISO exercise price per share shall not be
                  less than one hundred ten percent (110%) of the Fair Market
                  Value of the underlying Common Stock on the date the Option is
                  granted, as determined by the Committee.

                  (c) The NQO exercise price per share shall be any price deemed
                  appropriate by the Committee.

         6.4      The aggregate Fair Market Value (determined as of the time the
Option is granted) of the Common Stock with respect to which ISOs under this
Plan or any other plan of the Corporation or its Subsidiaries are exercisable
for the first time by an Optionee during any

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calendar year shall not exceed $100,000. Further, no Optionee shall receive
grants of Options under the Plan which exceed 250,000 shares during any fiscal
year of the Corporation.

         6.5      An Option shall be exercisable at such time or times, and with
respect to such minimum number of shares, as may be determined by the Committee
at the time of the grant; provided, however, that the Committee may, in its
discretion, accelerate the exercise date for any unexercisable Options when the
Committee deems such action to be appropriate under the circumstances. The
Option Agreement may require, if so determined by the Committee, that no part of
the Option may be exercised until the Optionee shall have remained in the employ
of the Corporation or of a Subsidiary for such period after the date of the
Option as the Committee may specify.

         6.6      The Corporation may require as a condition to the sale of
shares on the exercise of any Option, that the person exercising such Option
represent to the Corporation that he or she is acquiring such shares without a
view to the distribution thereof. The Corporation may prescribe the form of
legend which shall be affixed to the stock certificate representing shares to be
issued and the shares shall be subject to the provisions of any repurchase
agreement or other agreement restricting the sale or transfer thereof. Such
agreements or restrictions shall be noted on the certificate representing the
shares to be issued.

         7.       Exercise of Option.

         7.1      Each exercise of an Option granted hereunder, whether in whole
or in part, shall be by written notice thereof, delivered to the Chief Financial
Officer of the Corporation (or such other person as he may designate). The
notice shall state the number of shares with respect to which the Options are
being exercised and shall be accompanied by payment in full for the number of
shares so designated. Shares shall be registered in the name of the Optionee
unless the Optionee otherwise directs in his or her notice of election.

         7.2      Payment shall be made to the Corporation either (i) in cash,
including certified check, bank draft or money order as authorized by the
Corporation, or (ii) at the sole discretion of the Corporation, by delivering
any combination of the following forms of payment, provided the total Fair
Market Value of all payments made equals the exercise price: (a) shares of
Corporation Common Stock already owned by the participant, (b) a promissory note
reflecting terms and conditions acceptable to the Corporation, and/or (c) cash.
With respect to (ii), the Fair Market Value of stock so delivered shall be
determined as of the date immediately preceding the date of exercise.

         7.3      Upon notification of the amount due and prior to, or
concurrently with, the delivery to the Optionee of a certificate representing
any shares purchased pursuant to the exercise of an Option, the Optionee shall
promptly pay to the Corporation any amount necessary to satisfy applicable
federal, state or local withholding tax requirements.

         7.4      If the terms of an Option so permit, subject to the approval
of the Committee, an Optionee may elect by written notice to the Chief Financial
Officer of the Corporation (or such

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other person as he or she may designate), to satisfy the withholding tax
requirements associated with the exercise of an Option by (i) authorizing the
Corporation to retain from the number of shares of Common Stock that would
otherwise be deliverable to the Optionee, or (ii) delivering to the Corporation
from shares of Common Stock already owned by the Optionee, that number of shares
having an aggregate Fair Market Value equal to the tax payable by the Optionee
under Section 7.3. Any such election shall be in accordance with, and subject
to, applicable tax and securities laws, regulations and rulings.

         8.       Extraordinary Corporate Transactions. Nothwithstanding the
foregoing, unless the Stock Option Agreement provides otherwise, any Option
granted under this Plan shall be exercisable in full, without regard to any
installment exercise or vesting provisions, for a period specified by the Board,
but not to exceed sixty (60) days nor be less than seven (7) days, prior to the
occurrence of any of the following events: (i) dissolution or liquidation of the
Corporation other than in conjunction with a bankruptcy of the Corporation or
any similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Corporation will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Corporation or 75% or more of the outstanding Stock of the Corporation.

         9.       Changes in Corporation's Capital Structure. The existence of
outstanding Options shall not affect in any way the right or power of the
Corporation or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's capital
structure or its business, or any merger or consolidation of the Corporation, or
any issuance of Common Stock or subscription rights thereto, or any merger or
consolidation of the Corporation, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the Corporation, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise;
provided, however, that if the outstanding shares of Common Stock of the
Corporation shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares or recapitalization, the number and
kind of shares subject to the Plan or subject to any Options theretofore
granted, and the Option exercise prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of shares without changing
the aggregate Option exercise price.

         10.      Assignments. Any Option granted under this Plan shall be
exercisable only by the Optionee to whom granted during his or her lifetime and
shall not be assignable or transferable otherwise than by will or by the laws of
descent and distribution.

         11.      Severance; Death; Disability.

         11.1     Except as otherwise provided in this Section 11 or the Option
Agreement, an Option shall terminate, and no rights thereunder may be exercised,
if the employment of the Optionee is terminated by any reason other than his or
her death or disability, and all rights under the Option shall terminate and
expire upon such termination.

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         11.2     If the Optionee dies while in the employ of the Corporation or
a Subsidiary, the Optionee's rights under the Option may be exercised in whole
or in part, without regard to any installment exercise restrictions, at any time
within three months following such death by his or her personal representative
or by the person or persons to whom such rights under the Option shall pass by
will or by the laws of descent and distribution.

         11.3     If the employment of the Optionee is terminated because of
permanent disability, the Optionee, or his or legal representative, may at any
time within not more than three months after termination of his or her
employment, exercise his or her Option rights in whole or in part, without
regard to any installment exercise restrictions.

         11.4     Notwithstanding anything contained in Sections 11.1, 11.2 and
11.3 to the contrary, no Option rights shall be exercisable by anyone after the
expiration of the term of the Option.

         11.5     Transfers of employment between the Corporation and a
Subsidiary, or between Subsidiaries, will not constitute termination of
employment for purposes of any Option granted under this Plan. The Committee may
specify in the terms and conditions of an Option whether any authorized leave of
absence or absence for military or government service or for any other reasons
will constitute a termination of employment for purposes of the Option and the
Plan.

         12.      Rights of Participants. Neither the participant nor the
personal representatives, heirs, or legatees of such participant shall be or
have any of the rights or privileges of a shareholder of the Corporation in
respect of any of the shares issuable upon the exercise of an Option granted
under this Plan unless and until certificates representing such shares have been
issued and delivered to the participant or to such personal representatives,
heirs or legatees.

         13.      Securities Registration. If any law or regulation of the
Securities and Exchange Commission or of any other body having jurisdiction
shall require the Corporation or the participant to take any action in
connection with the exercise of an Option, then notwithstanding any contrary
provision of an Option Agreement or this Plan, the date for exercise of such
Option and the delivery of the shares purchased thereunder shall be deferred
until the completion of the necessary action. In the event that the Corporation
shall deem it necessary, the Corporation may condition the grant or exercise of
an Option granted under this Plan upon the receipt of a satisfactory certificate
that the Optionee is acquiring the Option or the shares obtained by exercise of
the Option for investment purposes and not with the view or intent to resell or
otherwise distribute such Option or shares. In such event, the stock certificate
evidencing such shares shall bear a legend referring to applicable laws
restricting transfer of such shares. In the event that the Corporation shall
deem it necessary to register under the Securities Act of 1933, as amended, or
any other applicable statute, any Options or any shares with respect to which an
option shall have been granted or exercised, then the participant shall
cooperate with the Corporation and take such action as is necessary to permit
registration or qualification of such Options or shares.

         14.      Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to an Optionee

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by the Corporation, nothing contained herein shall give any such Optionee any
rights that are greater than those of a general creditor of the Corporation. In
its sole discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu of or with respect to awards hereunder, provided,
however, that the existence of such trusts or other arrangements is consistent
with the unfunded status of the Plan.

         15.      Duration and Amendment.

         15.1     There is no express limitation upon the duration of the Plan,
except for the requirement of the Code that all ISOs must be granted within ten
years from the date the Plan is adopted, or the date the Plan is approved by the
shareholders, whichever is earlier.

         15.2     The Board may terminate or may amend the Plan at any time,
provided, however, that the Board may not, without approval of the shareholders
of the Corporation, (i) increase the maximum number of shares as to which
Options may be granted under the Plan, (ii) permit the granting of ISOs at less
than 100% of the Fair Market Value of the underlying Common Stock of the
Corporation at the time of grant, or (iii) change the class of employees
eligible to receive Options under the Plan.

         16.      Approval of Shareholders. This Plan expressly is subject to
approval of holders of a majority of the outstanding shares of Common Stock of
the Corporation, and if it is not so approved on or before one year after the
date of adoption of this Plan by the Board, the Plan shall not come into effect,
and any Options granted pursuant to this Plan shall be deemed canceled.

         17.      Conditions of Employment. The granting of an Option to a
participant under this Plan who is an employee shall impose no obligation on the
Corporation to continue the employment of any participant and shall not lessen
or affect the right of the Corporation to terminate the employment of the
participant.

                                       8<PAGE>   1
                                                                    EXHIBIT 10.2

                                APPLIED EPI, INC.
                                 2000 STOCK PLAN

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   SECTION     CONTENTS                                                    PAGE
   -------     --------                                                    ----
      1.       General Purpose of Plan; Definitions                          1
      2.       Administration                                                3
      3.       Stock Subject to Plan                                         4
      4.       Eligibility                                                   4
      5.       Stock Options                                                 4
      6.       Restricted Stock                                              7
      7.       Transfer, Leave of Absence, etc.                              8
      8.       Amendments and Termination                                    9
      9.       Unfunded Status of Plan                                       9
     10.       General Provisions                                           10
     11.       Effective Date of Plan                                       11

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                                APPLIED EPI, INC.
                                 2000 STOCK PLAN

         SECTION 1.  General Purpose of Plan; Definitions.

         The name of this plan is the Applied Epi, Inc. 2000 Stock Plan (the
"Plan"). The purpose of the Plan is to enable Applied Epi, Inc. (the "Company")
and its Subsidiaries to retain and attract executives, other key employees,
consultants and directors who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

         a.       "Board" means the Board of Directors of the Company.

         b.       "Cause" means a felony conviction of a participant or the
                  failure of a participant to contest prosecution for a felony,
                  or a participant's willful misconduct or dishonesty, any of
                  which is directly and materially harmful to the business or
                  reputation of the Company.

         c.       "Code" means the Internal Revenue Code of 1986, as amended.

         d.       "Committee" means the Committee referred to in Section 2 of
                  the Plan. If at any time no Committee shall be in office, then
                  the functions of the Committee specified in the Plan shall be
                  exercised by the Board.

         e.       "Company" means Applied Epi, Inc., a corporation organized
                  under the laws of the State of Minnesota (or any successor
                  corporation).

         f.       "Disability" means a physical or mental condition resulting
                  from a bodily injury or disease or mental disorder rendering
                  such person incapable of continuing to perform the employment
                  duties of such person at the Company as such duties existed
                  prior to the bodily injury, disease or mental disorder, as
                  determined by the Committee.

         g.       "Early Retirement" means retirement, with consent of the
                  Committee at the time of retirement, from active employment
                  with the Company and any Subsidiary or Parent Corporation of
                  the Company.

         h.       "Fair Market Value" of the Stock on any given date shall be
                  determined by the Committee as follows: (a) if the Stock is
                  listed for trading on one of more national securities
                  exchanges, or is traded on the Nasdaq Stock Market, the last
                  reported

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                  sales price on the principal such exchange or the Nasdaq Stock
                  Market on the date in question, or if such Stock shall not
                  have been traded on such principal exchange on such date, the
                  last reported sales price on such principal exchange or the
                  Nasdaq Stock Market on the first day prior thereto on which
                  such Stock was so traded; or (b) if the Stock is not listed
                  for trading on a national securities exchange or the Nasdaq
                  Stock Market, but is traded in the over-the-counter market,
                  including the Nasdaq Small Cap Market, the closing bid price
                  for such Stock on the date in question, or if there is no such
                  bid price for such Stock on such date, the closing bid price
                  on the first day prior thereto on which such price existed; or
                  (c) if neither (a) or (b) is applicable, by any means fair and
                  reasonable by the Committee, which determination shall be
                  final and binding on all parties.

         i.       "Incentive Stock Option" means any Stock Option intended to be
                  and designated as an "Incentive Stock Option" within the
                  meaning of Section 422 of the Code.

         j.       "Non-Employee Director" means a "Non-Employee Director" within
                  the meaning of Rule 16b-3(b)(3) of the Securities Exchange
                  Act, as amended, or any successor rule.

         k.       "Non-Qualified Stock Option" means any Stock Option that is
                  not an Incentive Stock Option, and is intended to be and is
                  designated as a "Non-Qualified Stock Option."

         l.       "Normal Retirement" means retirement from active employment
                  with the Company and any Subsidiary or Parent Corporation of
                  the Company on or after age 65.

         m.       "Outside Director" means a director who (a) is not a current
                  employee of the Company or any member of an affiliated group
                  which includes the Company; (b) is not a former employee of
                  the Company who receives compensation for prior services
                  (other than benefits under a tax-qualified retirement plan)
                  during the taxable year; (c) has not been an officer of the
                  Company; (d) does not receive remuneration from the Company,
                  either directly or indirectly, in any capacity other than as a
                  director, except as otherwise permitted under Code Section
                  162(m) and regulations thereunder. For this purpose,
                  remuneration includes any payment in exchange for goods or
                  services. This definition shall be further governed by the
                  provisions of Code Section 162(m) and regulations promulgated
                  thereunder.

         n.       "Parent Corporation" means any corporation (other than the
                  Company) in an unbroken chain of corporations ending with the
                  Company if each of the corporations (other than the Company)
                  owns stock possessing 50% or more of the total combined voting
                  power of all classes of stock in one of the other corporations
                  in the chain.

         o.       "Restricted Stock" means an award of shares of Stock that are
                  subject to

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                  restrictions under Section 6 below.

         p.       "Retirement" means Normal Retirement or Early Retirement.

         q.       "Stock" means the Common Stock, $.01 par value per share, of
                  the Company.

         r.       "Stock Option" means any option to purchase shares of Stock
                  granted pursuant to Section 5 below.

         s.       "Subsidiary" means any corporation (other than the Company) in
                  an unbroken chain of corporations beginning with the Company
                  if each of the corporations (other than the last corporation
                  in the unbroken chain) owns stock possessing 50% or more of
                  the total combined voting power of all classes of stock in one
                  of the other corporations in the chain.

         SECTION 2.  Administration.

         The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board consisting of at least two directors, all of
whom shall be Outside Directors and Non-Employee Directors and who shall serve
at the pleasure of the Board. The Committee may be a subcommittee of the
Compensation Committee of the Board.

         The Committee shall have the power and authority to grant to eligible
employees, consultants and directors pursuant to the terms of the Plan: (i)
Stock Options and (ii) Restricted Stock.

         In particular, the Committee shall have the authority:

         (i)      to select the officers, other key employees, consultants and
                  directors of the Company and its Subsidiaries to whom Stock
                  Options and/or Restricted Stock awards may from time to time
                  be granted hereunder;

         (ii)     to determine whether and to what extent Incentive Stock
                  Options, Non-Qualified Stock Options, or Restricted Stock
                  awards, or a combination of the foregoing, are to be granted
                  hereunder;

         (iii)    to determine the number of shares to be covered by each such
                  award granted hereunder;

         (iv)     to determine the terms and conditions, not inconsistent with
                  the terms of the Plan, of any award granted hereunder
                  (including, but not limited to, any restriction on any Stock
                  Option or other award and/or the shares of Stock relating
                  thereto); and

         (v)      to determine whether, to what extent and under what
                  circumstances Stock and other amounts payable with respect to
                  an award under this Plan shall be deferred either
                  automatically or at the election of the participant.

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         The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.

         All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.

         SECTION 3.  Stock Subject to Plan.

         The total number of shares of Stock reserved and available for
distribution under the Plan shall be 1,500,000. Such shares may consist, in
whole or in part, of authorized and unissued shares.

         If any shares that have been optioned cease to be subject to Stock
Options, or if any shares subject to any Restricted Stock award granted
hereunder are forfeited or such award otherwise terminates without a payment
being made to the participant, such shares shall again be available for
distribution in connection with future awards under the Plan.

         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding Stock Options granted under the Plan, and in the number
of shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.

         SECTION 4. Eligibility.

         Officers, other key employees, consultants and members of the Board of
the Company and Subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options or Restricted Stock awards
under the Plan. The optionees and participants under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.

         Notwithstanding the foregoing, no person shall receive grants of Stock
Options and Restricted Stock awards under this Plan which exceed 250,000 shares
during any fiscal year of the Company.

         SECTION 5.  Stock Options.

                                       6
<PAGE>   7

         Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after July 31, 2010.

         The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.

         Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.

         Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

         (a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option be less than 100% of the Fair Market Value of the Stock on the date
of the grant of the Stock Option. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110% of the
Fair Market Value of the Stock on the date the option is granted.

         (b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.

         (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time, provided, however, that unless the Stock Option has been approved by
the Board, the Committee or the shareholders of the Company, a Stock Option to a
director, officer

                                       7
<PAGE>   8

or a 10% shareholder of the Company or its Subsidiaries shall not be exercisable
for a period of six (6) months after the date of the grant. Notwithstanding the
foregoing, unless the Stock Option Agreement provides otherwise, any Stock
Option granted under this Plan shall be exercisable in full, without regard to
any installment exercise or vesting provisions, for a period specified by the
Board, but not to exceed sixty (60) days nor be less than seven (7) days, prior
to the occurrence of any of the following events: (i) dissolution or liquidation
of the Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 75% or more of the outstanding Stock of the Company.

         (d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or Restricted Stock subject to
an award hereunder (based on the Fair Market Value of the Stock on the date the
option is exercised, as determined by the Committee); provided, however, that in
the event payment is made in the form of shares of Restricted Stock, the
optionee will receive a portion of the option shares in the form of, and in an
amount equal to, the Restricted Stock award tendered as payment by the optionee.
No shares of Stock shall be issued until full payment therefor has been made. An
optionee generally shall have the rights to dividends and other rights of a
shareholder with respect to shares subject to the option when the optionee has
given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of Section
10.

         (e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Code or Title 1 of the Employee Retirement Income Security Act, or the
rules thereunder, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.

         (f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of twelve months (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.

         (g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock

                                       8
<PAGE>   9

Option held by such optionee may thereafter be exercised, to the extent it was
exercisable at the time of termination due to Disability (or on such accelerated
basis as the Committee shall determine at or after grant), but may not be
exercised after nine months (or such shorter period as the Committee shall
specify at grant) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is shorter. In the
event of termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.

         (h) Termination by Reason of Retirement. Unless otherwise determined by
the Committee, if an optionee's employment by the Company and any Subsidiary or
Parent Corporation terminates by reason of Retirement, any Stock Option held by
such optionee may thereafter be exercised to the extent it was exercisable at
the time of such Retirement, but may not be exercised after three months (or
such shorter period as Committee shall specify at grant) from the date of such
termination of employment or the expiration of the stated term of the option,
whichever period is shorter.

         (i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option may be exercised to the extent it was exercisable at such termination for
the lesser of three months or the balance of the option's term.

         (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.

         (k) Early Exercise. The Option may, but need not, include a provision
whereby the optionee may elect at any time before the termination of the
optionee's employment with, or services as a director or consultant of, the
Company or its Subsidiaries, to exercise the Option as to any part or all of the
shares of Common Stock subject to the Option prior to full vesting of the
Option. Any unvested shares so purchased may be subject to a repurchase option
in favor of the Company or to any other restrictions the Board or the Committee
determines to be appropriate.

         SECTION 6.  Restricted Stock.

         (a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.

                                       9
<PAGE>   10

         In the event that Restricted Stock awards are granted to members of the
Committee, such awards shall be granted by the Board.

         (b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.

             (i)  Each participant shall be issued a stock certificate in
         respect of shares of Restricted Stock awarded 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 award, substantially in the
         following form:

                   "The transferability of this certificate and the shares of
                   stock represented hereby are subject to the terms and
                   conditions (including forfeiture) of the Applied Epi, Inc.
                   2000 Stock Plan and an Agreement entered into between the
                   registered owner and Applied Epi, Inc. Copies of such Plan
                   and Agreement are on file in the executive offices of Applied
                   Epi, Inc."

             (ii)  The Committee shall require that the stock certificates
         evidencing such shares be held in custody by the Company until the
         restrictions thereon shall have lapsed, and that, as a condition of any
         Restricted Stock award, the participant shall have delivered a stock
         power, endorsed in blank, relating to the Stock covered by such award.

         (c) Restrictions and Conditions.  The shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following restrictions and
conditions:

             (i)   Subject to the provisions of this Plan and the award
         agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the participant shall
         not be permitted to sell, transfer, pledge or assign shares of
         Restricted Stock awarded under the Plan. Within these limits, the
         Committee may provide for the lapse of such restrictions in
         installments where deemed appropriate.

             (ii)  Except as provided in paragraph (c)(i) of this Section 6, the
         participant shall have, with respect to the shares of Restricted Stock,
         all of the rights of a shareholder of the Company, including the right
         to vote the shares and the right to receive any cash dividends. The
         Committee, in its sole discretion, may permit or require the payment of
         cash dividends to be deferred and, if the Committee so determines,
         reinvested in additional shares of Restricted Stock (to the extent
         shares are available under Section 3 and subject to paragraph (f) of
         Section 10). Certificates for shares of Unrestricted Stock shall be
         delivered to the grantee promptly after, and only after, the period of
         forfeiture shall have expired without forfeiture in respect of such
         shares of Restricted Stock.

             (iii) Subject to the provisions of the award agreement and
         paragraph (c)(iv) of this Section 6, upon termination of employment for
         any reason during the Restriction

                                       10
<PAGE>   11

         Period, all shares still subject to restriction shall thereupon be
         forfeited by the participant.

             (iv)  In the event of special hardship circumstances of a
         participant whose employment is terminated (other than for Cause),
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all remaining restrictions with respect to such participant's
         shares of Restricted Stock.

             (v)   All restrictions with respect to any participant's shares of
         Restricted Stock shall lapse or be deemed to have lapsed or been
         terminated on the tenth (10th) business day prior to the occurrence of
         any of the following events: (i) dissolution or liquidation of the
         Company, other than in conjunction with a bankruptcy of the Company or
         any similar occurrence, (ii) any merger, consolidation, acquisition,
         separation, reorganization or similar occurrence, where the Company
         will not be the surviving entity or (iii) the transfer of substantially
         all of the assets of the Company or 75% or more of the outstanding
         Stock of the Company.

         SECTION 7.  Transfer, Leave of Absence, etc.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;

         (b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and

         (c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.

         SECTION 8.  Amendments and Termination.

         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option or Restricted Stock award
theretofore granted, without the optionee's or participant's consent, or (ii)
which without the approval of the shareholders of the Company would cause the
Plan to no longer comply with Rule 16b-3 under the Securities Exchange Act of
1934, Section 422 of the Code or any other regulatory requirements

                                       11
<PAGE>   12

         The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.

         SECTION 9.  Unfunded Status of Plan.

         The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder; provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

         SECTION 10.  General Provisions.

         (a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.

         All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock awards shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
Federal or state 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.

         (b) Subject to paragraph (d) below, recipients of Restricted Stock
awards under the Plan (not including Stock Options) are not required to make any
payment or provide consideration other than the rendering of services.

         (c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.

         (d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includable as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee

                                       12
<PAGE>   13

regarding payment of, any Federal, state, or local taxes of any kind required by
law to be withheld with respect to the award. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements and the
Company and Subsidiaries shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise due to the
participant. With respect to any award under the Plan, if the terms of such
award so permit, a participant may elect by written notice to the Company to
satisfy part or all of the withholding tax requirements associated with the
award by (i) authorizing the Company to retain from the number of shares of
Stock that would otherwise be deliverable to the participant, or (ii) delivering
to the Company from shares of Stock already owned by the participant, that
number of shares having an aggregate Fair Market Value equal to part or all of
the tax payable by the participant under this Section 10(d). Any such election
shall be in accordance with, and subject to, applicable tax and securities laws,
regulations and rulings.

         (e) At the time of grant, the Committee may provide in connection with
any grant or award made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a repurchase right in favor of the
Company, pursuant to which the participant shall be required to offer to the
Company upon termination of employment for any reason any shares that the
participant acquired under the Plan, with the price being the then Fair Market
Value of the Stock or, in the case of a termination for Cause, an amount equal
to the cash consideration paid for the Stock, subject to such other terms and
conditions as the Committee may specify at the time of grant. The Committee may,
at the time of the grant of an award under the Plan, provide the Company with
the right to repurchase, or require the forfeiture of, shares of Stock acquired
pursuant to the Plan by any participant who, at any time within two years after
termination of employment with the Company, directly or indirectly competes
with, or is employed by a competitor of, the Company.

         (f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if the Committee (or the
Company's chief executive or chief financial officer) certifies in writing that
under Section 3 sufficient shares are available for such reinvestment (taking
into account then outstanding Stock Options and other Plan awards).

         SECTION 11.  Effective Date of Plan.

         The Plan was approved by the Board and became effective on July 31,
2000.

                                       13

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