Document:

ex4-1

Exhibit 4.1

HYPERTENSION DIAGNOSTICS, INC.

1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN

	1.	 	Purpose of Plan.

      This Plan shall be known as the “HYPERTENSION DIAGNOSTICS, INC. 1995
LONG-TERM INCENTIVE AND STOCK OPTION PLAN” and is hereinafter referred to as
the “Plan.” The purpose of the Plan is to aid in maintaining and developing
personnel capable of assuring the future success of HYPERTENSION DIAGNOSTICS,
INC., a Minnesota corporation (the “Company”), to offer such personnel
additional incentives to put forth maximum efforts for the success of the
business, and to afford them an opportunity to acquire a proprietary interest
in the Company through stock options and other long-term incentive awards as
provided herein. Options granted under this Plan may be either incentive stock
options (“Incentive Stock Options”) within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the “Code”), or options which do not qualify as
Incentive Stock Options. Awards granted under this Plan shall be stock
appreciation rights (“SARs”), restricted stock or performance awards as
hereinafter described.

	2.	 	Stock Subject to Plan.

      Subject to the provisions of Section 14 hereof, the stock to be subject to
options or other awards under the Plan shall be the Company’s authorized Common
Stock, par value $.0l per share (the “Common Shares”). Such shares may be
either authorized but unissued shares, or issued shares which have been
reacquired by the Company. Subject to adjustment as provided in Section 14
hereof, the maximum number of shares on which options may be exercised or other
award issued under this Plan shall be 400,000 shares. If an option or award
under the Plan expires, or for any reason is terminated or unexercised with
respect to any shares, such shares shall again be available for options or
awards thereafter granted during the term of the Plan.

	3.	 	Administration of Plan.

      (a) Except as provided in Section 3(b) hereof, the Plan shall be
administered by the Board of Directors of the Company or a committee thereof.
The members of any such committee shall be appointed by and serve at the
pleasure of the Board of Directors. If no committee is appointed by the Board,
the committee shall be comprised of all of the members of the Board of
Directors. (The group administering the Plan shall hereinafter be referred to
as the “Committee”.)

      (b) Notwithstanding Section 3(a) hereof, all option grants and awards
under this Plan to officers, directors and others who are subject to Section 16
under the Securities Exchange Act of 1934, as amended, and the rules of the
Securities and Exchange Commission promulgated thereunder, shall be made
exclusively by a committee (the “Disinterested Committee”). The Disinterested
Committee may be a subcommittee of the Committee and shall be comprised of at
least two members of the Board of Directors who have not received any option or
award under the Plan for the twelve month period prior to serving on the
Committee except as permitted by Rule 16b-3(c)(2)(i)(A) through (D) under the
Securities Exchange Act of 1934. Such persons shall not be eligible for option
grants or awards while serving on the Disinterested Committee. All references
hereinafter to the “Committee” shall mean the “Disinterested Committee” if the
action to be taken in administration of the Plan must be taken by the
Disinterested Committee.

      (c) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Stock covered by each option or award, (ii) to determine
the employees to whom and the time or times at which such options and awards
shall be granted and the number of shares to be subject to each, (iii) to
determine the form of payment to be made upon the exercise of an SAR or in
connection with performance awards, either cash, Common Shares of the Company
or a combination thereof, (iv) to determine the terms of exercise of each
option and award, (v) to accelerate the time at which all or any part of an
option or award may be exercised, (vi) to amend or modify the terms of any
option or award with the consent of the optionee, (vii) to interpret the Plan,
(viii) to prescribe, amend and rescind rules and regulations relating to the
Plan, (ix) to determine the terms and provisions of each option and award
agreement under the Plan

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(which agreements need not be identical), including the designation of those
options intended to be Incentive Stock Options, and (x) to make all other
determinations necessary or advisable for the administration of the Plan,
subject to the exclusive authority of the Board of Directors under Section 15
herein to amend or terminate the Plan. The Committee’s determinations on the
foregoing matters, unless otherwise disapproved by the Board of Directors of
the Company, shall be final and conclusive.

      (d) The Committee may select one of its members as its Chairman and shall
hold its meetings at such times and places as it may determine. A majority of
its members shall constitute a quorum. All determinations of the Committee
shall be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.

	4.	 	Eligibility.

      Incentive Stock Options may only be granted under this Plan to any full or
part-time employee (which term as used herein includes, but is not limited to,
officers and directors who are also employees) of the Company and of its
present and future subsidiary corporations (herein called “subsidiaries”).
Full or part-time employees, and non-employee consultants, Directors, agents or
independent contractors to the Company or one of its subsidiaries shall be
eligible to receive options which do not qualify as Incentive Stock Options and
awards. In determining the persons to whom options and awards shall be granted
and the number of shares subject to each, the Committee may take into account
the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and
such other factors as the Committee in its discretion shall deem relevant. A
person who has been granted an option or award under this Plan may be granted
additional options or awards under the Plan if the Committee shall so
determine; provided, however, that for Incentive Stock Options, to the extent
the aggregate fair market value (determined at the time the Incentive Stock
Option is granted) of the Common Shares with respect to which all Incentive
Stock Options are exercisable for the first time by an employee during any
calendar year (under all plans described in subsection (d) of Section 422 of
the Code of his employer corporation and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as options which
do not qualify as Incentive Stock Options. Nothing in the Plan or in any
agreement thereunder shall confer on any employee any right to continue in the
employ of the Company or any of its subsidiaries or affect, in any way, the
right of the Company or any of its subsidiaries to terminate his or her
employment at any time.

	5.	 	Price.

      Except as provided in Section 10, the option price for all Incentive Stock
Options granted under the Plan shall be determined by the Committee but shall
not be less than 100% of the fair market value of the Common Shares at the date
of grant of such option. The option price for options granted under the Plan
which do not qualify as Incentive Stock Options and, if applicable, the price
for all awards shall also be determined by the Committee and may be other than
100% of the fair market value of the Common Shares. For purposes of the
preceding sentence and for all other valuation purposes under the Plan, the
fair market value of the Common Shares shall be as reasonably determined by the
Committee. If on the date of grant of any option or award hereunder the Common
Shares are not traded on an established securities market, the Committee shall
make a good faith attempt to satisfy the requirements of this Section 5 and in
connection therewith shall take such action as it deems necessary or advisable.

	6.	 	Term.

      Each option and award and all rights and obligations thereunder shall
expire on the date determined by the Committee and specified in the option or
award agreement. The Committee shall be under no duty to provide terms of like
duration or vesting for options or awards granted under the Plan, but the term
of an Incentive Stock Option may not extend more than ten (10) years from the
date of grant of such option.

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	7.	 	Exercise of Option or Award.

      (a) The Committee shall have full and complete authority to determine
whether an option or award will be exercisable in full at any time or from time
to time during the term thereof, or to provide for the exercise thereof in such
installments, upon the occurrence of such events (such as termination of
employment for any reason) and at such times during the term of the option as
the Committee may determine and specify in the option or award agreement.

      (b) The exercise of any option or award granted hereunder shall only be
effective at such time that the sale of Common Shares pursuant to such exercise
will not violate any state or federal securities or other laws.

      (c) An optionee or grantee electing to exercise an option or award shall
give written notice to the Company of such election and of the number of shares
subject to such exercise. The full purchase price of such shares shall be
tendered with such notice of exercise and the original award agreement.
Payment shall be made to the Company in cash (including bank check, certified
check, personal check, or money order), or, at the discretion of the Committee
and as specified by the Committee in the optionee or grantee’s option or award
agreement, (i) by delivering certificates for the Company’s Common Shares
already owned by the optionee or grantee for a period of not less than six (6)
months, having a fair market value as of the date of exercise equal to the full
purchase price of the shares; or (ii) a combination of cash and such shares.
The fair market value of such tendered shares shall be determined as provided
in Section 5 herein. Until such person has been issued the shares subject to
such exercise, he or she shall possess no rights as a shareholder with respect
to such shares.

	8.	 	Additional Restrictions.

      The Committee shall have full and complete authority to determine whether
all or any part of the Common Shares of the Company acquired upon exercise of
any of the options or awards granted under the Plan shall be subject to
restrictions on the transferability thereof or any other restrictions affecting
in any manner the optionee’s or grantee’s rights with respect thereto, but any
such restriction shall be contained in the agreement relating to such options
or awards.

	9.	 	Alternative Stock Appreciation Rights.

      (a) Grant. At the time of grant of an option or award under the Plan (or
at any other time), the Committee, in its discretion, may grant a Stock
Appreciation Right (“SAR”) evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.

      (b) Exercise. An SAR shall be exercised by the delivery to the Company of
a written notice which shall state that the holder thereof elects to exercise
his or her SAR as to the number of shares specified in the notice and which
shall further state what portion, if any, of the SAR exercise amount
(hereinafter defined) the holder thereof requests be paid to in cash and what
portion, if any, is to be paid in Common Shares of the Company. The Committee
promptly shall cause to be paid to such holder the SAR exercise amount either
in cash, in Common Shares of the Company, or any combination of cash and shares
as the Committee may determine. Such determination may be either in accordance
with the request made by the holder of the SAR or in the sole and absolute
discretion of the Committee. The SAR exercise amount is the excess of the fair
market value of one share of the Company’s Common Shares on the date of
exercise over the per share exercise price in respect of which the SAR was
granted, multiplied by the number of shares as to which the SAR is exercised.
For the purposes hereof, the fair market value of the Company’s shares shall be
determined as provided in Section 5 herein.

	10.	 	Ten Percent Shareholder Rule.

      Notwithstanding any other provision in the Plan, if at the time an option
is granted pursuant to the Plan, the optionee owns directly or indirectly
(within the meaning of Section 425(d) of the Code) Common Shares of the Company
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or its parent or subsidiary corporations,
if any (within the meaning of Section 422(b)(6) of the Code), then

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any Incentive Stock Option to be granted to such optionee pursuant to the Plan
shall satisfy the requirements of Section 422(c)(6) of the Code, and the option
price shall be not less than 110% of the fair market value of the Common Shares
of the Company determined as described herein, and such option by its terms
shall not be exercisable after the expiration of five (5) years from the date
such option is granted.

	11.	 	Non-Transferability.

      No option or award granted under the Plan shall be transferable by an
optionee or grantee, otherwise than by will or the laws of descent or
distribution. Except as otherwise provided in an option or award agreement,
during the lifetime of an optionee or grantee, the option shall be exercisable
only by such optionee or grantee.

	12.	 	Restricted Stock Awards.

      Awards of Common Shares subject to forfeiture and transfer restrictions
may be granted by the Committee. Any restricted stock award shall be evidenced
by an agreement in such form as the Committee shall from time to time approve,
which agreement shall comply with and be subject to the following terms and
conditions and any additional terms and conditions established by the Committee
that are consistent with the terms of the Plan:

      (a) Grant of Restricted Stock Awards. Each restricted stock award made
under the Plan shall be for such number of Common Shares as shall be determined
by the Committee and set forth in the agreement containing the consideration to
be paid by the grantee (if any) and other terms of such restricted stock award.
Such agreement shall set forth a period of time during which the grantee must
remain in the continuous employment of the Company in order for the forfeiture
and transfer restrictions to lapse. If the Committee so determines, the
restrictions may lapse during such restricted period in installments with
respect to specified portions of the shares covered by the restricted stock
award. The agreement may also, in the discretion of the Committee, set forth
performance or other conditions that will subject the Common Shares to
forfeiture and transfer restrictions. The Committee may, at its discretion,
waive all or any put of the restrictions applicable to any or all outstanding
restricted stock awards.

      (b) Delivery of Common Shares and Restrictions. At the time of a
restricted stock award, a certificate representing the number of Common shares
awarded thereunder shall be registered in the name of the grantee. Such
certificate shall be held by the Company or any custodian appointed by the
Company for the account of the grantee subject to the terms and conditions of
the Plan, and shall bear such a legend setting forth the restrictions imposed
thereon as the Committee, in its discretion, may determine. The grantee shall
have all rights of a shareholder with respect to the Common Shares, including
the right to receive dividends and the right to vote such shares, subject to
the following restrictions: (i) the grantee shall not be entitled to delivery
of the stock certificate until the expiration of the restricted period and the
fulfillment of any other restrictive conditions set forth in the restricted
stock agreement with respect to such Common Shares; (ii) none of the Common
Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered or disposed of during such restricted period or until after the
fulfillment of any such other restrictive conditions; and (iii) except as
otherwise determined by the Committee, all of the Common Shares shall be
forfeited and all rights of the grantee to such Common Shares shall terminate,
without further obligation on the part of the Company, unless the grantee
remains in the continuous employment of the Company for the entire restricted
period in relation to which such Common Shares were granted and unless any
other restrictive conditions relating to the restricted stock award are met.
Any Common Shares, any other securities of the Company and any other property
(except for cash dividends) distributed with respect to the Common Shares
subject to restricted stock awards shall be subject to the same restrictions,
terms and conditions as such restricted Common Shares.

      (c) Termination of Restrictions. At the end of the restricted period and
provided that any other restrictive conditions of the restricted stock award
are met, or at such earlier time as otherwise determined by the Committee, all
restrictions set forth in the agreement relating to the restricted stock award
or in the Plan shall lapse as to the restricted Common Shares subject thereto,
and a stock certificate for the appropriate number of Common Shares, free of
the restrictions and the restricted stock legend, shall be delivered to the
grantee or his beneficiary or estate, as the case may be.

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	13.	 	Performance Awards.

      The Committee is further authorized to grant Performance awards. Subject
to the terms of this Plan and any applicable award agreement, a Performance
award granted under the Plan (i) may be denominated or payable in cash, Common
Shares (including, without limitation, restricted stock), other securities,
other awards, or other property and (ii) shall confer on the holder thereof
rights valued as determined by the Committee, in its discretion, and payable
to, or exercisable by, the holder of the Performance awards, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee, in its discretion, shall establish. Subject to the
terms of this Plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance
period, the amount of any Performance award granted, and the amount of any
payment or transfer to be made by the granter and by the Company under any
Performance award shall be determined by the Committee.

	14.	 	Dilution or Other Adjustments.

      If there shall be any change in the Common Shares through merger,
consolidation, reorganization, recapitalization, dividend in the form of stock
(of whatever amount), stock split or other change in the corporate structure,
appropriate adjustments in the Plan and outstanding options and awards shall be
made by the Committee. In the event of any such changes, adjustments shall
include, where appropriate, changes in the aggregate number of shares subject
to the Plan, the number of shares and the price per share subject to
outstanding options and awards and the amount payable upon exercise of
outstanding awards, in order to prevent dilution or enlargement of option or
award rights.

	15.	 	Amendment or Discontinuance of Plan.

      The Board of Directors may amend or discontinue the Plan at any time.
Subject to the provisions of this Section, no amendment of the Plan, however,
shall without shareholder approval: (i) increase the maximum number of shares
under the Plan as provided in Section 2 herein, (ii) decrease the minimum price
provided in Section 5 herein, (iii) extend the maximum term under Section 6, or
(iv) modify the eligibility requirements for participation in the Plan. The
Board of Directors shall not alter or impair any option or award theretofore
granted under the Plan without the consent of the holder of the option or
award.

	16.	 	Time of Granting.

      Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board of Directors or by the shareholders of the Company, and no
action taken by the Committee or the Board of Directors (other than the
execution and delivery of an option or award agreement), shall constitute the
granting of an option or award hereunder.

	17.	 	Income Tax Withholding and Tax Bonuses.

      (a) In order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems appropriate
to ensure that all applicable federal or state payroll withholding, income or
other taxes, which are the sole and absolute responsibility of an optionee or
grantee under the Plan, are withheld or collected from such optionee or
grantee. In order to assist an optionee or grantee in paying all federal and
state taxes to be withheld or collected upon exercise of an option or award
which does not qualify as an Incentive Stock Option hereunder, the Committee,
in its absolute discretion and subject to such additional terms and conditions
as it may adopt, shall permit the optionee or grantee to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the shares
otherwise to be delivered upon exercise of such option or award with a fair
market value, determined in accordance with Section 5 herein, equal to such
taxes or (ii) delivering to the Company Common Shares other than the shares
issuable upon exercise of such option or award with a fair market value,
determined in accordance with Section 5, equal to such taxes.

      (b) The Committee shall have the authority, at the time of grant of an
option under the Plan or at any time thereafter, to approve tax bonuses to
designated optionees or grantees to be paid upon their exercise of options or
awards granted hereunder. The amount of any such payments shall be determined
by the Committee. The

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Committee shall have full authority in its absolute discretion to determine the
amount of any such tax bonus and the terms and conditions affecting the vesting
and payment thereafter.

	18.	 	Effective Date and Termination of Plan.

      (a) This Plan shall be effective August, 1995 (the “Effective Date”) as
approved by the Bond of Directors and hereby terminates and supersedes all
previous plans adopted by the Company providing for the granting of stock
options or awards. However, unless within 12 months before or 12 months after
the Plan is adopted by the Board of Directors, the Plan is approved by the vote
of the holders of a majority of the outstanding Capital Stock of the
Corporation, the Plan and options granted hereunder shall not qualify under
Section 422 of the Code. All subsequent stock options granted will be
Non-Qualified Stock Options. All Options granted prior to disqualification of
the Plan for failure to obtain shareholder approval shall be converted to
Non-Qualified Stock Options.

      (b) This Plan shall terminate ten (10) years after the Effective Date or
at such earlier time as the Board of Directors shall determine. No option or
award may be granted after such termination, but termination of the Plan shall
not, without the consent of the optionee or grantee, alter or impair any rights
or obligations under any option or award theretofore granted.

6ex4-2

Exhibit 4.2

HYPERTENSION DIAGNOSTICS, INC.

1998 STOCK OPTION PLAN

	1.	 	Purpose.

      The 1998 Stock Option Plan (the “Plan”) has been established by
Hypertension Diagnostics, Inc. (the “Company”) (i) to attract and retain highly
qualified individuals to devote their abilities to the Company; (ii) to
generate an additional incentive to achieve long-term goals; (iii) to closely
associate the interests of participants in the Plan with those of the Company’s
other shareholders through compensation that is based on the Company’s common
stock; and thereby promote the future success of the Company, including the
growth in value of the Company’s equity and enhancement of long-term
shareholder return.

	2.	 	Definitions.

      In this Plan the following definitions shall apply:

      a.      “Board” means the Board of Directors of the Company.

      b.      “Code” means the Internal Revenue Code of 1986, as amended.

      c.      “Committee” means the group of individuals administering the Plan, as
provided in Section 3 of the Plan.

      d.      “Common Stock” means the common stock of the Company or the number and
kind of shares of stock or other securities into which such Common Stock may be
changed in accordance with Section 7 of the Plan.

      e.      “Consultant” means any person who is engaged by the Company or a
Related Company to render consulting or advisory services as an independent
contractor and is compensated for such services.

      f.      “Eligible Recipients” means any Employee, Consultant or Independent
Director of the Company or a Related Company.

      g.      “Employee ” means any officer or other employee of the Company or a
Related Company. The payment of a director’s fee by itself shall not be
sufficient to constitute employment by the Company or a Related Company.

      h.      “Exchange Act” means the Securities Exchange Act of 1934, as amended.

      i.      “Fair Market Value” means, with respect to the Common Stock, as of any
date:

		
	 	      (i) if the Common Stock is listed or admitted to trading on any
stock exchange or is quoted on the NASDAQ National Market System or the
NASDAQ Small Cap Market, the average of the reported high and low sale
prices of the Common Stock on such exchange or by NASDAQ as of such date
(or, if no shares were traded on such day, as of the next preceding day
on which there was such a trade); or

		
	 	      (ii) if the Common Stock is not so listed or admitted to trading on
a stock exchange and not quoted on the NASDAQ National Market System or
the NASDAQ Small Cap Market, the average of the closing bid and asked
prices in the over-the-counter market as of such date (or, if no shares
were traded on such day, as of the next preceding day on which there was
such a trade), as so reported by the OTC Bulletin Board (or such
comparable reporting service); or

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	 	      (iii) in the absence of an established public market for the Common
Stock, such price as the Committee determines in good faith in the
exercise of its reasonable discretion.

      j.      “Incentive Stock Option” means a right to purchase Common Stock that
qualifies as an “Incentive Stock Option” within the meaning of Section 422 of
the Code.

      k.      “Independent Director” means a member of the Board who is not an
Employee of the Company.

      l.      “Nonemployee Director” means any member of the Board who is an “outside
director” within the meaning of section 162(m) of the Code and regulations
promulgated thereunder, and who is a “nonemployee director” within the meaning
of Rule 16b-3 promulgated under the Exchange Act.

      m.      “Nonqualified Stock Option” means a right to purchase Common Stock that
does not qualify as an Incentive Stock Option.

      n.      “Option” means an Incentive Stock Option or a Nonqualified Stock
Option.

      o.      “Optionee” means an Eligible Recipient who receives one or more Options
under the Plan.

      p.      “Option Form” means the duration of the Option granted to the Optionee.

      q.      “Related Company” means any company during any period in which it is a
“parent company” (as that term is defined in Code section 424(e)) with respect
to the Company, or a “subsidiary corporation” (as that term is defined in Code
section 424(f)) with respect to the Company.

      r.      “Securities Act” means the Securities Act of 1933, as amended.

	3.	 	Administration.

      a.      The Plan will be administered by either the full Board or a committee
of two or more Nonemployee Directors. The committee shall be selected by, and
shall serve at the discretion of the Board. As used in this Plan, the term
“Committee” will refer to the Board or to such a committee of Nonemployee
Directors, if established.

      b.      Subject to the provisions of the Plan, the Committee shall have the
authority and discretion to:

		
	 	      (i) select from among the Eligible Recipients those persons who
shall receive Options under the Plan;

		
	 	      (ii) determine the nature and extent of the Options to be made to
each Eligible Recipient, including the number of shares of Common Stock
to be subject to each Option, the exercise price of the Options, the
manner in which Options will vest or become exercisable;

		
	 	      (iii) determine the time or times when Options will be granted;

		
	 	      (iv) determine the duration of each Option;

		
	 	      (v) impose such limitations, restrictions and conditions upon any
such award as the Committee shall deem appropriate; and

		
	 	      (vi) interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other determinations and
take all other action necessary or advisable for the implementation and
administration of the Plan.

      c.      All decisions and interpretation made by the Committee on all matters
relating to the Plan shall be final and binding. No member of the Committee
shall be liable for any action taken or decision made in good faith relating to
the Plan or any award thereunder.

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	4.	 	Eligibility for Participation.

      The Committee shall determine and designate, from time to time, from among
the Eligible Recipients, those persons who will be granted Options. In making
this selection and in determining the form and amount of awards under the Plan,
the Committee may take into account the individual’s functions and
responsibilities, the individual’s present and potential contributions to the
Company’s success and such other factors as the Committee deems relevant.

	5.	 	Shares Subject to Plan.

      a.      Shares of stock which may be issued under the Plan shall be authorized
and unissued shares of Common Stock. Subject to Section 7, the maximum number
of shares of Common Stock which may be issued under the Plan shall be 750,000.
The maximum number of shares of Common Stock which may be available for
Incentive Stock Options is 750,000.

      b.      For purposes of calculating the maximum number of shares of Common
Stock which may be issued under the Plan:

		
	 	      (i) All the shares issued (including the shares, if any, withheld
for tax withholding requirements) shall be counted when cash is used as
full payment for shares issued upon exercise of an Option;

		
	 	      (ii) Only the net shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when
previously acquired shares of Common Stock are tendered as full or
partial payment for shares issued upon exercise of an Option.

      c.      Any shares of Common Stock subject to an outstanding Option that for
any reason is terminated, forfeited or expired shall again be available for
issuance under the Plan.

	6.	 	Option Grants.

      a.      Type of Options. The Committee may from time to time, and subject to
the provisions of the Plan and such other terms and conditions as the Committee
may prescribe, grant an Option to any Eligible Recipient. The date an Option
is granted shall mean the date upon which the Committee grants an Option to
purchase a specific number of shares to an Eligible Recipient under the Plan.
Options under the Plan may be either Nonqualified Stock Options or Incentive
Stock Options, as determined in the discretion of the Committee.

      b.      Stock Option Price. The price per share of each Option shall be
determined by the Committee in its discretion at the time the Option is
granted; provided, however, such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted. In
the case of an Incentive Stock Option grant to an individual then owning more
than 10% of the total combined voting power of all classes of stock of the
Company or a Related Company, the price per share shall not be less than 110%
of the Fair Market Value of a share of Common Stock on the date the Option is
granted.

      c.      Option Term. The term of an Option shall be set by the Committee in
its sole discretion; provided that no Incentive Stock Option may be exercised
after a period of ten (10) years from the date it is granted or five (5) years
after the grant date if the Incentive Stock Option is granted to an individual
then owning more than 10% of the total combined voting power of all classes of
stock of the Company or a Related Company. No Option shall be exercisable
after the expiration of its term.

      d.      Exercise. Each Option shall be exercisable at such times and under
such conditions as may be determined by the Committee at the time of grant. An
Option may be exercised only by delivering to the Company a written notice of
such exercise, accompanied by full payment therefor, and otherwise in
accordance with such rules and procedures as may be established by the
Committee.

3

      e.      Manner
of Payment. The full purchase price for shares of Common Stock
purchased upon the exercise of any Option shall be paid at the time of such
exercise. The purchase price shall be payable in cash or by tendering shares
of Common Stock previously owned by the Optionee, or in any combination
thereof, as determined by the Committee. Any shares transferred to the Company
as payment of the purchase price shall be valued at Fair Market Value as of the
day preceding the date of exercise of such Option. In addition, the Committee
may permit an Optionee to elect to pay the purchase price upon the exercise of
an Option by authorizing a registered broker-dealer to sell shares of Common
Stock (or a sufficient portion of the shares) acquired upon the exercise of the
Option and remit to the Company a sufficient portion of the sale proceeds to
pay the entire purchase price and any tax withholding resulting from such
exercise.

      f.      Aggregate
Limitation of Stock Subject to Incentive Stock Options. To
the extent that the aggregate Fair Market Value of the shares of Common Stock
with respect to which Incentive Stock Options are exercisable for the first
time by an Optionee during any calendar year (under all plans of the Company or
a Related Company) exceeds $100,000 (or such other amount as may be prescribed
by the Code from time to time), such Incentive Stock Options shall be treated
as Nonqualified Stock Options, to the extent required by section 422 of the
Code.

      g.      Transferability. No Option granted under this Plan shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution. During the life of the Optionee, such Option shall be
exercisable only by such person or by such person’s guardian or legal
representative.

      h.      Agreement
with Company. At the time of a grant of an Option under the
Plan, the Committee may require the Optionee to enter into an agreement with
the Company in a form specified by the Committee, agreeing to the terms and
conditions of the Plan and to such additional terms and conditions as the
Committee may, in its sole discretion, prescribe.

	7.	 	Share Adjustments.

      In the event of a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, recapitalization, merger,
consolidation, reorganization, split-off, spin-off or exchange of shares), the
Committee may adjust the Options to preserve the benefits or potential benefits
of the Options. Actions by the Committee may include adjustment of (i) the
number and class of shares of stock which may be delivered under the Plan, (ii)
the number and class of shares of stock subject to outstanding Options and
(iii) the stock option price of outstanding Options.

	8.	 	Limit on Distribution.

      Distribution of shares of Common Stock under the Plan shall be subject to
the following:

      a.      Notwithstanding any provision of the Plan, the Company shall have no
liability to distribute any shares of Common Stock under the Plan unless such
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.

      b.      All certificates for shares of Common Stock delivered under the Plan
pursuant to an exercise of an Option shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under
applicable state and federal law or applicable rules of the Securities and
Exchange Commission and any stock exchange, and the Committee may cause a
legend to be placed on any such certificates to make appropriate reference to
such restrictions.

	9.	 	Tax Withholding.

      Whenever the Company proposes or is required to distribute shares of
Common Stock under the Plan the Company may require the recipient to remit to
the Company an amount sufficient to satisfy any Federal, state or local tax
withholding requirements before delivery of any certificate for such shares or,
in the discretion of the Committee, the Company may withhold from the shares to
be delivered shares sufficient to satisfy all or a portion of

4

such tax withholding requirements. Whenever under the Plan payments are to be
made in cash, such payments may be net of an amount sufficient to satisfy any
Federal, state, and local tax withholding requirements.

	10.	 	Amendment and Termination.

      a.      The Committee may, at any time, amend or terminate the Plan, provided
that, subject to Section 7:

		
	 	      (i) no amendment or termination may, without the approval of the
shareholders, increase the maximum number of shares of Common Stock which
may be issued under the Plan or extend the term of the Plan; and

		
	 	      (ii) no amendment or termination may, in the absence of written
consent to the change by the affected Optionee (or, if the Optionee is
not then living, the affected beneficiary), adversely affect the rights
of any Optionee or beneficiary under any Option granted under the Plan
before such amendment or termination is adopted by the Committee.

      b.      The Plan shall terminate at midnight on May 1, 2008, which is ten years
after the date the Plan was approved by the Board..

	11.	 	Limitation of Implied Rights.

      a.      The Plan does not constitute a contract of employment, and selection as
an Optionee will not give any person the right to be retained in the employ of
the Company or any Related Company, nor any right in claim to any benefit under
the Plan, unless such right or claim has specifically accrued under the terms
of the Plan. Except as otherwise provided in the Plan, no Option granted under
the Plan shall confer upon the holder thereof any right as a shareholder of the
Company prior to the date on which the person fulfills all conditions for
receipt of such rights.

      b.      Neither an Optionee nor any other person shall, by reason of the Plan,
acquire any right or title to the assets, funds or property of the Company or
any Related Company whatsoever. An Optionee shall only have a contractual
right to the stock payable under the Plan, unsecured by any assets of the
Company or any Related Company.

	12.	 	Miscellaneous.

      a.      The Committee’s determinations under the Plan (including without
limitation determinations of the persons to receive Options, the form, amount
and timing of such Options, the terms and provisions of such Options and the
agreements evidencing same) need not be uniform and may be made by it
selectively among Eligible Recipients or Optionees whether or not such persons
are similarly situated.

      b.      The validity, construction, interpretation, administration and effect
of the Plan and any rules, regulations and actions relating to the Plan will be
governed by and construed exclusively in accordance with the laws of the State
of Minnesota.

	13.	 	Effective Date.

      a.      Subject to the approval of the shareholders of the Company at the
Company’s 1998 special meeting of its shareholders, the Plan shall become
effective as of May 22, 1998.

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