Document:

Exhibit 10.1

                         PURCHASE AND LICENSE AGREEMENT

THIS PURCHASE AND LICENSE AGREEMENT ("Agreement") is entered into and effective
as of October 19, 2000, by and between PILOT TECHNOLOGIES, INC., a Minnesota
corporation, having its principal place of business at 11012 Jackson Drive, Eden
Prairie, MN 55347 ("Pilot"); WILLIAM A. PEDERSON, a shareholder of Pilot
("WAP"); and PHOTO CONTROL CORPORATION, a Minnesota corporation, having its
principal place of business at 4800 Quebec Ave. North, Minneapolis, MN 55428
("PCC").

WITNESSETH:

WHEREAS, Pilot owns the intellectual property rights for certain passive docking
stations, and the technology related thereto, for use with certain Apple
Computer, Inc. ("Apple") MacIntosh platform computers, marketed under the
trademark and tradename "BookEndz(R)"; and

WHEREAS, PCC desires to purchase the technology related to Pilot's BookEndz
products (including all rights, title and interests in U.S. Patent Reg. No.
5,186,646 and U.S. Trademark Reg. No. 1,798,548 to enable PCC to develop and
market passive docking stations for use with MacIntosh and Wintel platform
computers; and

WHEREAS, Pilot is willing to sell such technology to PCC in accordance with the
terms of this Agreement; and

WHEREAS, PCC desires to purchase from Pilot, and Pilot desires to sell to PCC,
certain of Pilot's tooling, inventory and equipment more specifically described
herein, in accordance with the terms of this Agreement; and

WHEREAS, WAP is the President and CEO of Pilot, and the inventor and designer of
the BookEndz(R) products.

NOW, THEREFORE, for and in consideration of the promises, covenants, agreements
and payments set forth herein, the sufficiency of which is hereby acknowledged,
Pilot and PCC agree as follows:

ARTICLE 1: DEFINITIONS

1.1 Wherever used in this Agreement the following words and terms shall have the
respective meanings ascribed to them:

         (A)      "BookEndz" means Pilot's passive docking stations for notebook
                  computers.

         (B)      "Derivative Works" means (i) for copyrightable or copyrighted
                  material, any translation, modification, improvement,
                  abridgment, revision or other form in which the Proprietary
                  Technology and/or the BookEndz, or any portion thereof, may be
                  recast, transformed or adapted; (ii) for patentable or
                  patented material relating to the Proprietary Technology
                  and/or the BookEndz, or any portion thereof, any improvement
                  thereon or modification thereto; (iii) for material relating
                  to the Proprietary Technology and/or the BookEndz, or any
                  portion thereof, which is protected by trade secret, any new
                  material derived from

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                  such existing trade secret material, including new material
                  which may be protected by copyright, patent and/or trade
                  secret.

         (C)      "Documentation" collectively means any and all written
                  materials relating to the BookEndz products, including, but
                  not limited to, all manufacturing, engineering, design or
                  other technical data, net lists, bill of materials,
                  schematics, product manuals, vendors list, customer lists and
                  advertising and marketing material relating to the BookEndz
                  products.

         (D)      "Unit sales" means the total number of units derived from the
                  sales of the BookEndz, Derivative Works thereof, and PCC
                  BookEndz Products.

         (E)      "Inventory" means the inventory listed in Exhibit "B".

         (F)      "PCC BookEndz Products" means the BookEndz, and Derivatives
                  Works thereof, sold by or for PCC pursuant to this Agreement.

         (G)      "Patent" means U.S. Patent Reg. No. 5,186,646, covering a
                  Connector Device for Computers.

         (H)      "Product Designs" means the Pilot-proprietary designs and
                  schematics for various BookEndz models.

         (I)      "Proprietary Technology" means the Patent, Trademark,
                  Documentation, Derivative Works and Product Designs and other
                  technology, methods, processes or know-how of Pilot used in
                  the manufacture and sale of BookEndz.

         (J)      "Purchased Assets" means the Patent, Trademark, Product
                  Designs, Documentation, Tooling, Inventory, Proprietary
                  Technology, equipment, supplies and other miscellaneous
                  personal property including that set forth on Exhibit "A" as
                  used in the manufacture and sale of BookEndz. "Purchased
                  Assets" specifically exclude Pilot's tradenames; "Pilot
                  Technologies, Inc.", "Pilot-Tech", and Pilot's web site
                  "www.pilot-tech.com", any portions of Pilot's business not
                  related to BookEndz, all accounts receiveable, and other Pilot
                  assets.

         (K)      "Tooling" means the tooling listed in Exhibit "B".

         (L)      "Trademark" means Pilot's registered trademark and tradename
                  "BookEndz(R)", U.S. Trademark Reg. No. 1,798,548.

         (M)      "Transfer Date" means October 26, 2000, or such earlier date
                  as the parties may mutually agree upon.

ARTICLE 2: SALE OF PURCHASED ASSETS

2.1 Asset Purchase. Pilot agrees to sell, transfer and convey to PCC, and PCC
agrees to buy and accept such transfer and conveyance from Pilot, any and all of
Pilot's rights, title and interest in the Purchased

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Assets, free and clear of all liens, claims, encumbrances, pledges,
restrictions, equities and charges. PCC's obligation to purchase the Patent,
Trademark and Proprietary Technology, shall be subject to the satisfaction of
the conditions set forth below.

2.2 Purchase Price. PCC agrees to pay to Pilot as the purchase price: (i) the
amount of One Hundred and Five Thousand Dollars ($105,000.00) for the Inventory,
Tooling, and Training (this is an estimated amount to be adjusted by mutual
agreement based on actual inventory on the Transfer Date), and (iii) the
remainder of the One Million Seven Hundred and Sixty Thousand Dollars
($1,760,000.00) for the Patent, Trademark and Proprietary Technology. The total
One Million Seven Hundred and Sixty Thousand Dollars ($1,760,000.00) purchase
price shall be payable to Pilot as follows:

         (A)      On the date of Closing, PCC shall pay to Pilot the
                  non-refundable amount of $1,000,000.00 by cashier's check.
                  This non-refundable payment includes payments of One Hundred
                  and Five Thousand Dollars ($105,000.00) for Inventory,
                  Tooling, Training and a down payment of Eight Hundred,
                  Ninety-five Thousand Dollars ($895,000.00) for the Patent,
                  Trademark, and Proprietary Technology license fees (note both
                  of the foregoing amounts may change based on actual inventory
                  on the Transfer Date).

         (B)      Terms and conditions for payment of the balance of Seven
                  Hundred and Sixty Thousand Dollars ($760,000.00) for Patent,
                  Trademark, and Proprietary Technology licensing fees:

                           Payment terms: Beginning upon the Transfer Date, PCC
                           will make payments of Forty Dollars ($40.00) per
                           BookEndz unit sold in the previous 30 days not later
                           than the 15th of the following month, up to a maximum
                           payment total of Seven Hundred and Sixty Thousand
                           Dollars ($760,000.00). PCC, at it's option, may pay
                           all or any portion of the remaining balance in one
                           lump sum at any time prior to the completion of the
                           payment of the balance without penalty. Pilot will
                           transfer ownership of the Patent and Trademark to PCC
                           upon receiving the final payment of the balance of
                           Seven Hundred and Sixty Thousand Dollars
                           ($760,000.00).

2.3 Possession. On the Transfer Date, Pilot shall ship to PCC at the notice
address set forth below the (i) Inventory, (ii) Tooling (in the possession of
Pilot), (iii) Product Designs, and (iii) Documentation. The parties intend that
Pilot only transfer possession of the Tooling, Product Designs and Documentation
to PCC under this Article 2.3, and that title to such Purchased Assets be
transferred in accordance with Article 2.4 below. The parties acknowledge that
Encor Technology, Kell Container Corp., Inc., Adhan Industries, and Saturn
Electronics (collectively the "Manufacturers" and individually a
"Manufacturer"), are currently in possession of certain items of the Tooling,
including the current product molds. On the Transfer Date, Pilot shall notify
the Manufacturers that Pilot has transferred certain rights and interests in the
Tooling to PCC pursuant to the terms of this Agreement, and that each
Manufacturer may schedule product runs at the request and for the account of
PCC. Pilot agrees to assist PCC to establish manufacturing relationships with
each of the Manufacturers.

2.4 Title. Title to the Purchased Assets shall be transferred to PCC as follows:

         (A)      Title to the Inventory and Tooling shall be transferred to PCC
                  on the Transfer Date by a Bill of Sale executed by Pilot as
                  Exhibit "C" attached hereto.

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         (B)      Title to the Patent and Trademark shall be transferred to PCC
                  by separate assignments similar in form to Exhibits "E & F"
                  when the total amount paid by PCC to Pilot reaches One Million
                  Seven Hundred and Sixty Thousand Dollars ($1,760,000.00). The
                  assignments shall be executed by Pilot on the date Pilot
                  receives the final payment, and will be delivered to PCC
                  within one business day.

         (C)      Title to the remainder of the Purchased Assets (including
                  Proprietary Technology, Derivative Works, Product Designs and
                  Documentation) shall automatically transfer to PCC when the
                  total amount paid by PCC to Pilot reaches One Million Seven
                  Hundred and Sixty Thousand Dollars ($1,760,000.00).

2.5 Taxes. All applicable sales, recording, documentary, transfer, or other
taxes and fees, if any, incurred by Pilot will be paid by Pilot. All applicable
sales, recording, documentary, transfer, or other taxes and fees, if any,
incurred by PCC will be paid by PCC.

2.6 Closing. The Closing of this Agreement shall be held on October 19, 2000.
The parties agree to close this transaction by the exchange of documents in
person, via facsimile, mail or other means, or as otherwise agreed by the
parties. The parties agree to execute all documents and perform such acts as may
be required to consummate the transactions contemplated by this Agreement, and
as may be reasonably required by either party or their counsel.

2.7 Restrictive Covenant.

         (A)      The parties acknowledge and agree that (i) PCC is purchasing
                  the complete BookEndz product line from Pilot under the terms
                  of this Agreement; (ii) PCC markets its products, and intends
                  to market the PCC BookEndz products, on a worldwide basis;
                  (iii) it is the intent of the parties that neither Pilot, nor
                  its employees or shareholders, compete with PCC in the
                  manufacture, marketing or sale of the BookEndz products, or
                  similar products or Derivative Works, for the duration
                  specified in this Agreement; and (iv) the restrictive covenant
                  given herein is substantial consideration inducing PCC to
                  enter into this Agreement.

         (B)      Pilot and WAP agree that they shall not, without the written
                  consent of PCC, directly or indirectly, engage in the
                  invention, design, engineering or manufacture of docking
                  stations for notebook computers, whether MacIntosh or Wintel
                  platform, with anyone other than PCC, or advise (as employee,
                  stockholder or otherwise) consult with, or assist other
                  persons or businesses relating to the invention, design,
                  engineering or manufacture of docking stations for notebook
                  computers, whether MacIntosh or Wintel platform, in
                  competition with PCC. The foregoing non-competition covenant
                  shall terminate in either of the following manners: (i) upon
                  the termination of the License Term due to breach of this
                  Agreement by PCC as specified in Articles 3.4(i) and 3.5; or
                  (ii) five years following PCC's full payment of the
                  $1,760,000.00 Purchase Price.

         (C)      Notwithstanding the foregoing, nothing shall prohibit Pilot
                  nor WAP from engaging in the technology business for products
                  other than docking stations for notebook computers.

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         (D)      The parties hereby acknowledge that the restrictions contained
                  in this Article 2.7 are reasonable and necessary for the
                  protection of PCC and necessary to enable PCC to establish
                  itself in the worldwide marketplace

2.8 Pilot's Limited Warranty. The parties acknowledge that Pilot offers a 30-day
money back guarantee and a one (1) year repair/replacement manufacturer's
limited warranty to purchasers of Pilot's BookEndz products. As of the Transfer
Date, PCC agrees to accept and assume all warranty obligations of Pilot as
described in this Article 2.8.

         (A)      BookEndz Returns. PCC assumes coverage of all warranty and
                  non-warranty repair or replacement claims for the Product
                  Family as of the Transfer Date.

         (B)      Regarding MacWarehouse only, Pilot agrees to honor credits for
                  units returned from MacWarehouse under the current
                  MacWarehouse contract for 60 calendar days past the Transfer
                  Date.

         (C)      Pilot agrees to honor credits for units returned from end
                  users under the current Pilot Technologies 30 day money back
                  guarantee for 30 calendar days past the Transfer Date.

         (D)      PCC agrees to purchase all units sold by Pilot and returned to
                  PCC or Pilot by MacWarehouse and end users at a finished goods
                  inventory cost of Sixty Three Dollars ($63.00) per unit upon
                  notification those units are available.

ARTICLE 3: LICENSE OF PROPRIETARY TECHNOLOGY

3.1 Ownership of the Proprietary Technology. PCC acknowledges that, until PCC
pays to Pilot the entire purchase price (including all license fees) as set
forth in Article 2.2 above, Pilot retains all rights, title and interests in the
Patent, Trademark and Proprietary Technology, subject to the restrictions,
rights and licenses granted herein. Pilot acknowledges that, upon payment in
full of the purchase price, all of Pilot's rights, title and interests in and to
the Patent, Trademark, and Proprietary Technology shall automatically transfer
to PCC hereunder. PCC shall then own and retain all rights to any Derivative
Works.

3.2 Product License. Subject to all the terms and conditions set forth in this
Agreement, Pilot hereby grants PCC a worldwide, exclusive, non-transferable,
royalty-bearing, revocable (in accordance with the terms and conditions of this
Agreement) license to design, make, manufacture, have manufactured, sell, offer
to sell and use BookEndz under the Patent, Product Designs, Proprietary
Technology and Derivative Works.

Until the title to the Patent transfers to PCC hereunder, any PCC BookEndz
Product or Derivative Work thereof which utilizes the Patent must contain the
following text or label, clearly visible to any user: "US Patent # 5,186,646.
Produced by Photo Control Corporation under license from Pilot Technologies,
Inc."

3.3 Documentation and Trademark License. Subject to all the terms and conditions
set forth in this Agreement, Pilot hereby grants PCC a worldwide, exclusive,
non-transferable, royalty-bearing, revocable (in accordance with the terms and
conditions of this Agreement) license, during the term of this Agreement, to
reproduce and use the Documentation and Trademark in conjunction with the
manufacture, marketing and sale of the PCC BookEndz Products.

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Until the title to the Trademark transfers to PCC hereunder, any PCC
documentation, advertising or public materials which uses the Trademark must
contain the following text clearly visible to any user: "BookEndz(R) is a
registered trademark of Pilot Technologies, Inc."

3.4 License Term. The licenses granted in this Article 3 shall be for duration
of the Patent (10 years), unless terminated earlier as a result of (i) the
breach of this Agreement by PCC as provided in Article 3.5 below ("License
Term"), or (ii) the complete Purchase Price of One Million Seven Hundred and
Sixty Thousand Dollars ($1,760,000.00) has been paid to Pilot.

3.5 License Termination. Pilot may terminate the Licenses granted in this
Article 3 in the event of a default or other failure by PCC to perform any
obligation arising from this Agreement, including the obligation to pay license
fees and make reports, but only if PCC shall not have remedied its default or
failure to perform within thirty (30) calendar days after receipt from Pilot of
written notice of such default.

Pilot may also terminate the Licenses granted in this Article 3 in the event the
BookEndz docking station Form and Function criteria have or can be met, as
determined at Pilot's reasonable discretion, and PCC, at its discretion, decides
not to build and promote and sell the BookEndz with at least an equivalent
amount of activity as was done with previous models. Such decision must be made
within 30 calendar days of the date the Form and Function Criteria have been met
as determined at Pilot's reasonable discretion. If PCC elects not to produce the
new BookEndz model, PCC has first right of purchase to make a lump sum payment
for the remaining balance of the License Fees (see Article 4) within the same 30
day period. The first right of purchase automatically ends at midnight on the
30th day. All licenses automatically terminate if PCC does not commit to produce
the new model or pay the remaining license balance by the 30th day.

Pilot and PCC agree on the following Form and Function criteria: The PCC
BookEndz dock must successfully mate with at least 4 individual and separate
ports on a new model of notebook computer in a single motion. Ports may include
(but are not limited to) any combination of 4 of the following: external power,
audio in, audio out, USB, FireWire, ethernet (or alternative network), serial,
parallel, keyboard, mouse, video out, video in, and modem. The parties agree
that the Form and Function test will not be met if PCC's cost of a BookEndz unit
is greater than 3.0% of the retail price of the notebook computer for which it
is intended.

PCC may terminate the Licenses granted in this Article 3 at any time by
providing Pilot thirty (30) calendar days' prior written notice of PCC's intent
to terminate the Licenses.

3.6 Obligations upon License Termination. In the event of termination of the
licenses as set forth in Article 3.5:

         (A)      All rights and licenses granted to PCC hereunder shall revert
                  immediately to Pilot, and, except as set forth in this Article
                  3.6(A), PCC agrees to discontinue the manufacturing, marketing
                  and sales of the PCC BookEndz Products. Provided, however, for
                  a period of ninty (90) days following the termination of this
                  Agreement, PCC may continue to build and assemble the PCC
                  BookEndz Products with any raw material inventory on hand, and

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                  may continue to distribute the PCC BookEndz Products until its
                  inventory is depleted, provided that PCC continues to pay
                  License Fees in accordance with Article 4.

         (B)      Within thirty (30) days following the termination of the
                  License pursuant to Article 3.5, PCC shall transfer any and
                  all Tooling, Product Designs, and Documentation in its
                  possession to Pilot, and PCC shall deliver a bill of sale to
                  Pilot transferring title to the Tooling to Pilot. PCC shall
                  coordinate the transfer of possession and title to the Tooling
                  not within its possession with the Manufacturers. Said
                  transfer shall be for no additional consideration.

         (C)      Following termination, except as described in Article 3.6(A),
                  PCC's obligation to pay Pilot License Fees, including
                  Additional License Fees shall terminate.

3.7 Exclusivity. It is the intent of the parties that PCC is hereby granted
exclusive licenses from Pilot to commercially exploit the BookEndz and
Derivative Works thereof on a worldwide basis. Accordingly, Pilot agrees that
during the License Term, it will not grant any license, either directly or
indirectly, for rights to or use of the BookEndz or Proprietary Technology, to
any third party in contravention of PCC's exclusivity. Pilot further agrees that
neither it, nor any affiliate of Pilot, will directly or indirectly make, use or
sell the BookEndz or any Derivative Work thereof in competition with PCC in
contravention of the exclusive rights granted herein.

3.8 Third Party Manufacturers. The parties acknowledge that PCC may desire to
have third parties manufacture all or parts of the PCC BookEndz Products.
Accordingly, PCC shall maintain the right to employ third parties to manufacture
the PCC BookEndz Products for and on behalf of PCC.

3.9 BookEndz Pricing. PCC shall have the right, in its sole discretion, to
determine the sales price of the PCC BookEndz Products, the medium and frequency
of advertisement of the PCC BookEndz Products and make other marketing decisions
relating to the PCC BookEndz Products.

ARTICLE 4: LICENSE FEES AND REPORTS

4.1 License Fees. During the License Term, PCC shall pay to Pilot continuing
license fees ("License Fees") as follows:

         (A)      On or before the fifteenth (15th) day of each calendar month
                  during the License Term, PCC shall pay to Pilot License Fees
                  in the amount of Forty Dollars ($40.00) per unit sold in the
                  previous month.

         (B)      Following the expiration of the License Term, PCC's obligation
                  to pay License Fees, including Additional License Fees, shall
                  terminate, and PCC shall have no further liability to Pilot
                  hereunder.

4.2 Reports. Within fifteen (15) days following the end of each month, PCC shall
provide to Pilot a written report setting forth the number of PCC BookEndz
Products sold during such calendar month. This report will set forth
sales/returns information for the immediately preceding month, and will set
forth a calculation of any License Fees due to Pilot. In the event any of the
PCC BookEndz Products are

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returned for credit or refund by any purchaser, PCC may deduct the appropriate
unit amount from the total number of units for purposes of calculating the
License Fees to be paid to Pilot.

4.3 Payment Address. Unless otherwise designated by Pilot in writing, all
license fees payments will be made in United States currency and will be made by
check payable to Pilot at the notice address set forth below.

4.4 Right of Audit. PCC agrees to provide Pilot, or its duly appointed agent
and/or certified public accountant, access, during normal business hours, to all
information reasonably necessary to verify the sales of the PCC Products, upon
seven (7) days' prior written notice by Pilot to PCC of a demand for such
access, and allow Pilot to verify correct payment of license fees by PCC to
Pilot based on information obtained during such access. If such audit reveals a
shortfall payment by PCC of two percent (2%) or more, PCC shall bear the cost of
such audit (in addition to the amount of such shortfall). In all other
instances, Pilot shall bear all costs associated with any such audit.

ARTICLE 5: INITIAL TRAINING AND ONGOING CONSULTING RELATIONSHIP

5.1 Pilot and WAP herein agree to work with PCC after the date of closing,
during normal business hours and without separte charge to PCC, to acquaint
Buyer with the operation of the business related to BookEndz as further outlined
in Exhibit C.

5.2 The parties acknowledge that Pilot has been developing passive docking
stations for the Apple PowerBook utilizing Proprietary Technology, and that the
Proprietary Technology and rights for such BookEndz stations have been
transferred to PCC hereunder. Pilot agrees to provide sales, marketing,
technical, and engineering consultation, specifically from WAP, to complete the
design and development of the BookEndz or to assist in operations efforts for
PCC. Such consulting services shall be performed as an independent contractor at
a rate of $145.00 per hour (or Pilot's then current rate if more than 1 year
from the date of closing), and if WAP is required to travel to provide such
consultation, PCC shall reimburse Pilot for all reasonable travel, meals,
lodging, and other reasonable out-of-pocket expenses actually incurred by WAP in
the course of such consultation. Pilot shall submit weekly invoices to PCC for
payment, containing the amount of time and written description of the services
performed during such time. Said invoices shall be payable by PCC within ten
(10) days following PCC's receipt of the same. WAP shall coordinate his services
with designated PCC staff members.

5.3 PCC shall provide to Pilot and WAP the following equipment: (i) one (1)
noteook computer with required accessories and power supply for each new model
to be designed by Pilot and WAP. Said equipment shall be returned to PCC upon
the conclusion of the design phase for each new BookEndz model.

5.4 Title and ownership to the PCC BookEndz shall be vested in PCC.

ARTICLE 6: INDEMNIFICATION; PATENT MAINTENANCE AND LITIGATION

6.1 During the term of the License Agreement Pilot and WAP shall indemnify and
hold PCC harmless from and against all claims, demands, liabilities, actions,
litigations, losses, damages, costs and expenses (including reasonable
attorneys' fees) arising out of or in any way related to claims asserted against
PCC of infringement of adversely owned patents, copyrights or any other
intellectual property rights by

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reason of PCC's manufacture, marketing or sale of the PCC BookEndz Products.
Pilot and WAP shall have no liability to PCC if any infringement or claim is
based upon modifications to the Proprietary Technology by PCC if the unmodified
Proprietary Technology would otherwise not infringe.

6.2 It is specifically agreed that neither party shall incur any liabilities to
any third party by virtue of the acts or omissions of the other party, and if
claims or liabilities are asserted due to such acts or omissions, the party
committing such act or omission shall indemnify and hold the other party
harmless, from and against all such claims, demands, liabilities, actions,
litigations, losses, damages, costs and expenses (including reasonable
attorneys' fees) provided such act or omission is committed without the signed
written consent of the other party.

6.3 The parties recognize that (i) Pilot has designed the BookEndz; (ii) Pilot
has manufactured, or has caused to have manufactured, the existing inventory of
BookEndz products (Exhibit "B"), and (iii) PCC will manufacture, or cause to
have manufactured by a third party, certain PCC BookEndz Products and Derivative
Works of the BookEndz. It is intended that each party retain the product
liability responsibilities commensurate with their respective performance
hereunder. Accordingly, each party agrees to indemnify and hold harmless the
other party from and against all such claims, demands, liabilities, actions,
litigations, losses, damages, costs and expenses (including reasonable
attorneys' fees) arising out of or related to the following:

         (A)      PCC shall indemnify and hold Pilot harmless for claims
                  relating to manufacturing defects for the PCC BookEndz
                  Products manufactured by PCC, or for PCC BookEndz Products
                  manufactured by a third party at PCC 's request;

         (B)      Pilot shall indemnify and hold PCC harmless for claims
                  relating to manufacturing defects for any BookEndz products or
                  components manufactured by Pilot, or for Pilot by a third
                  party at Pilot's request.

6.4 Pilot and/or WAP shall vigorously pursue and defend its Patent and Trademark
from all infringing activities by third parties, at its own expense and shall
retain amounts recovered. PCC will join in such legal actions and take such
other necessary steps as reasonably requested by Pilot for Pilot to enforce
proprietary rights in the Patent or Trademark. In the event Pilot does not
pursue enforcement of its rights, PCC shall have the right to prosecute third
party infringement of the Patent and Trademark, at its own expense and shall
retain amounts recovered. Pilot will join in such legal actions and take such
other necessary steps as reasonably requested by PCC for PCC to enforce
proprietary rights in the Patent or Trademark.

6.5 Pilot shall, at its own expense, diligently maintain the Patent and
Trademark including payment of maintenance fees. In the event that Pilot
abandons its maintenance duty, Pilot shall timely notify PCC of such, and grant
such rights and cooperation to PCC as necessary for PCC to assume the
maintenance of the Patents. PCC shall deduct all reasonable costs and expenses
of such patent prosecution and maintenance from any amounts owed by PCC to Pilot
or WAP under this Agreement.

6.6 Pilot will transfer to PCC certain information regarding customer
identification and credit card numbers. PCC shall indemnify and hold Pilot
harmless from and against all claims, demands, liabilities, actions,
litigations, losses, damages, costs and expenses (including reasonable
attorneys' fees) arising out

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of or in any way related to claims asserted against Pilot for improper
disclosure or use of such customer information by PCC and its employees.

ARTICLE 7: REPRESENTATIONS AND WARRANTIES

7.1 Pilot and WAP hereby represents, warrants and covenants to PCC the
following:

         (A)      Pilot is a duly organized corporation, validly existing and in
                  good standing under the laws of the State of Minnesota. Pilot
                  has all necessary corporate power to carry on its business as
                  it is presently being conducted. See EXHIBIT "G"

         (B)      Pilot is the sole and exclusive owner of the Proprietary
                  Technology and the inventor of the BookEndz.

         (C)      Pilot has the power and full legal authority to sell and
                  deliver the Purchased Assets to PCC in accordance with Article
                  2, free and clear of all liens, claims, charges, restrictions,
                  equities and encumbrances. Upon delivery of the Purchased
                  Assets to PCC, and delivery of the purchase price as more
                  particularly set forth in Article 2, PCC will acquire
                  indefeasible title to Purchased Assets, free and clear of all
                  liens, claims, encumbrances, pledges, restrictions, equities
                  and charges.

         (D)      There are no known material claims, actions, suits or
                  proceedings pending or threatened against Pilot, at law or in
                  equity, relating to or affecting the sale of the Purchased
                  Assets or the obligations of Pilot contemplated by this
                  Agreement.

         (E)      Pilot owns all legal rights, title and interest in and to the
                  Patent and Trademark, and has the full legal authority to
                  grant and assign the rights and licenses specified herein.

         (F)      The execution and delivery of this Agreement and the
                  consummation of the transaction contemplated hereby in
                  accordance with the terms hereof, will not violate or conflict
                  with the certificate or articles of incorporation or bylaws of
                  Pilot.

         (G)      Seller shall pay any brokerage fee applicable to this
                  Agreement and transaction.

         (H)      This Agreement, the transactions contemplated hereunder and
                  all instruments and documents to be delivered hereunder have
                  been duly authorized by all necessary or appropriate corporate
                  actions.

7.2 PCC represents, warrants and covenants to Pilot the following:

         (A)      PCC is a duly organized corporation, validly existing and in
                  good standing under the laws of the State of Minnesota.

         (B)      PCC has the requisite power to execute, deliver and perform
                  this Agreement and all agreements, instruments or other
                  documents executed and delivered or to be executed and
                  delivered by it pursuant to this Agreement, and has taken all
                  action required by law, its

                                       10
<PAGE>

                  articles of organization, operating agreement or otherwise, to
                  authorize the execution, delivery and performance of this
                  Agreement and such related documents. The execution and
                  delivery of this Agreement and the agreements, instruments and
                  other documents related hereto executed and delivered, or to
                  be executed and delivered, pursuant to this Agreement, do not,
                  and the consummation of the transaction is contemplated hereby
                  and thereby will not, violate any provision of the articles of
                  organization or operating agreement of PCC or any agreement,
                  instrument, order, judgment or decree to which PCC is a party
                  or by which it is bound, nor violate any restrictions of any
                  kind to which it is subject.

         (C)      There are no claims for brokerage commission or finder's fees
                  in connection with the transactions contemplated by this
                  Agreement resulting from any action taken by PCC or its
                  members, managers, employees or agents.

         (D)      PCC agrees to use its reasonable good faith efforts to advance
                  the manufacturing, marketing and sale of the PCC BookEndz
                  Products during the License Term.

ARTICLE 8:  LIMITATION OF LIABILITY

The parties to this agreement agree that under all circumstances and
notwithstanding anything to the contrary in this agreement, in no event shall
either party be liable to the other party for indirect, incidential,
consequential or special damages arising out of this agreement.

ARTICLE 9: NOTICES

9.1 Any formal notice required or permitted under this Agreement shall be deemed
sufficiently given if said notice is personally delivered, sent by registered or
certified mail (return receipt requested) or delivered by a nationally
recognized overnight delivery service (Federal Express, Airborne, United Parcel
Service) to the party to whom said notice is to be given. Notices delivered in
person shall be deemed to be served effective as of the date the notice is
delivered or sent, as applicable. Notices sent by registered or certified mail
(return receipt requested) shall be deemed to be served seventy-two (72) hours
after the date said notice is postmarked to the addressee, postage prepaid.
Notices sent by overnight courier shall be effective when signed for by a
representative of the receiving party.

Until changed by written notice given by one party to the other, the addresses
and facsimile numbers of the parties shall be as follows:

Pilot:                                                PCC:
------                                                ----
Pilot Technologies, Inc.                              Photo Control Corporation.
Attn: William A. Pederson                             Attn: Jack R. Helmen
11012 Jackson Drive                                   4800 Quebec Ave. North
Eden Prairie, MN 55347                                Minneapolis, MN 55428
Fax: (612) 828-6806                                   Fax: (612) 537-2852

                                       11
<PAGE>

ARTICLE 10: MISCELLANEOUS

10.1 Commencement Date. This Agreement shall become a legal and binding contract
upon signature of same by both parties.

10.2 Governing Law. This Agreement shall be governed by the laws of the State of
Minnesota as effective and in force on the date of this Agreement.

10.3 Waiver. The failure of either party to insist upon the strict performance
of any of the terms or conditions of this Agreement or to exercise any option,
right or remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.

10.4 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.

10.5 Assignment. Neither party hereto shall have the right to assign this
Agreement without the prior written consent of the other, provided that Pilot
shall have the right to assign the payment of the License Fees to a third person
without the prior written consent of PCC, and PCC shall have the right to assign
this Agreement to a subsidiary, affiliate or successor in interest of PCC. All
rights and obligations of this Agreement shall be binding upon and inure to the
benefit of the parties and any of their successors or assigns.

10.6 Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity and enforceability of each other
provision of this Agreement.

10.7 Construction. The parties acknowledge that each party and its counsel have
had the opportunity to review and negotiate the terms and conditions of this
Agreement, and that the normal rule of construction to the effect that any
ambiguities are to be construed against the drafting party shall not be employed
in the interpretation of this Agreement or any exhibits or amendments hereto.

10.8 Headings. The descriptive headings used herein are for the convenience of
the parties only and shall not be used in the construction of this Agreement.

10.9 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to their relationship. There are no verbal
understandings, agreements, representations or warranties between the parties
which are not expressly set forth herein. This Agreement supersedes all prior
agreements and understandings between the parties, both written and oral.

10.10 Tax consequences Tax consequences on a sale or purchase vary
substantially, based on personal individual circumstances. If the Buyer or
Seller have questions concerning their tax situation they should seek competent
legal advice from their accountant or attorney.

10.11 Nondisclosure and Confidentiality Pilot, WAP and PCC recognize and agree
that they each have certain confidential business and proprietary information
and trade secrets, including, without

                                       12
<PAGE>

limitation, customer lists and records, information concerning employee
relations, selling, marketing and distribution techniques, methods, processes
and programs of PCC and Pilot, which information and trade secrets are used by
each in its business affairs to obtain a competitive advantage. PCC, WAP and
Pilot further recognize that the protection of such confidential information and
trade secrets against unauthorized disclosure and use is of critical importance
to each in maintaining their affairs and competitive position. Accordingly, PCC,
WAP and Pilot agree that they will not, at any time prior to the signing of this
Agreement or thereafter, directly or indirectly make any independent use of,
publish or disclose to any person or organization, any of the confidential
business and proprietary information and trade secrets of the other, except for
the purposes of this Agreement or to the extent required by law. Upon the
written request of either Pilot, WAP or PCC, the other party will promptly
return to the requesting party any such confidential information solely owned by
the requesting party. The obligations of this Article 10.11 shall not apply to
information which (i) is now, or hereafter becomes, generally known or available
to the public through no act or failure to act on the part of the receiving
party; (ii) was known by the receiving party before receiving such information
from the disclosing party; (iii) is hereafter rightfully obtained by the
receiving party from a third party, without breach of any obligation to the
disclosing party; or (iv) is independently developed by the receiving party
without the use of or reference to confidential information of the disclosing
party. Further, Pilot and WAP acknowledge and agree that PCC, as a public
company traded on Nasdaq, has certain public reporting requirements pursuant to
securites law and regulations, requirements of Nasdaq, and financial accounting
standareds, and Pilot and WAP hereby consent to disclosure of such information,
including confidential information of Pilot and WAP, as reasonably deemed
necessary in the opinion of PCC's counsel.

10.12 Acceptance of Inventory and Tooling PCC acknowledges it accepts all
inventory and tooling "as is", without regard to the specific application of any
item to future BookEndz products.

IN WITNESS WHEREOF, Pilot and PCC have caused this Agreement to be executed in
originals in Minneapolis, Minnesota as of the day and year first above written.

PHOTO CONTROL CORPORATION                  PILOT TECHNOLOGIES, INC.

By:  /s/ Jack R. Helmen                    By:  /s/ William A. Pederson
     ------------------                         --------------------------------
     Jack R. Helmen, CEO                        William A. Pederson, Pres. & CEO
          ("PCC")                                        ("Pilot ")

                                                /s/  William A. Pederson
                                                --------------------------------
                                                William A. Pederson, Shareholder
                                                         ("WAP")

                                       13
<PAGE>

EXHIBIT "A"

PURCHASED ASSETS
----------------

MOLDS FOR BOOKENDZ MODELS
All Mold sets

CARTON DIES FOR CURRENT BOOKENDZ MODELS
Original Set
International

METAL PART DIES FOR
BOOKENDZ CURRENT MODELS
Security Plate
FireWire Bracket

INVENTORY
Assembled units
Committed Parts Orders for future shipments

INTELLECTUAL PROPERTY
Patent 5,186,646
Trademark #1,798,548
Pilot Historical Account List/Purchase
History

TEST COMPUTERS FOR BOOKENDZ CURRENT MODELS
1999 Lombard G3 with AppleCare
2000 Pismo G3 with AppleCare

OTHER TEST EQUIPMENT
15" NEC Monitor
Amplified Speaker Set
USB Mouse
SCSI Zip Drive
Cables
FireWire Drive

SUPPORT MATERIALS
Advertising templates
Manual documents
Web site pages

SOFTWARE/HARDWARE
Barcode Software
FileMaker for 2 Mac workstations
Fetch 3.03 for web file transfer
Claris HomePage 3 for web page
PageMaker 5 for advertising

OPERATIONAL SYSTEMS
Operator            Mac //SI with
Work Station        Mon/Kbd/Mouse/Enet

File Server &       Mac//FX with
Network Test        Mon/Kbd/Mouse/Enet
Source
                    FM 3 Server Software
                    Pilot Templates
                    Battery Backup
                    SCSI Zip Drive for Data Backup

Printer
LW2 NTX             with Cartridge and Enet Interface

Networking
8 port 10/100
base T hub

Projection TV
for
client/show
presentations

                                       14
<PAGE>

EXHIBIT "B"

INVENTORY, AND TOOLING
----------------------

MOLDS FOR BOOKENDZ MODELS
All Mold sets

CARTON DIES FOR CURRENT BOOKENDZ MODELS
Original Set
International

METAL PART DIES FOR
BOOKENDZ CURRENT MODELS
Security Plate
FireWire Bracket

INVENTORY
Assembled units
Committed Parts Orders for future
shipments

TEST COMPUTERS FOR BOOKENDZ
CURRENT MODELS
1999 Lombard G3 with AppleCare
2000 Pismo G3 with AppleCare

OTHER TEST EQUIPMENT
15" NEC Monitor
Amplified Speaker Set
USB Mouse
SCSI Zip Drive
Cables
FireWire Drive

SUPPORT MATERIALS
Advertising templates
Manual documents
Web site pages

SOFTWARE/HARDWARE
Barcode Software
FileMaker Application for 2 Mac workstations
Fetch 3.03 for web file transfer
Claris HomePage 3 for web page
PageMaker 5 for advertising

OPERATIONAL SYSTEMS
Operator        Mac //SI with
Work Station    Mon/Kbd/Mouse/Enet

File Server &   Mac //FX with
Network Test    Mon/Kbd/Mouse/Enet
Source
                FM 3 Server Software
                Pilot Templates
                Battery Backup
                SCSI Zip Drive for Data Backup

Printer
LW2 NTX         with Cartridge and Enet Interface

Networking
8 port 10/100
base T hub

Projection TV
for
client/show
presentations

                                       15
<PAGE>

EXHIBIT "C"

BILL OF SALE - INVENTORY AND TOOLING
------------------------------------

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned, Pilot Technologies, Inc. ("Pilot") for One Hundred and
Five Thousand Dollars ($105,000.00) and other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, sells, transfers,
assigns and conveys to Photo Control Corporation, any and all of Pilot's rights,
title and interest to the Inventory and Tooling , as those terms are defined in
the October 19, 2000 Purchase and License Agreement between the parties, free
and clear of all liens, claims, encumbrances, pledges, restrictions, equities
and charges.

DATED this 19th day of October, 2000.

PILOT TECHNOLOGIES, INC.

By: /s/ William A. Pederson
    -----------------------------
    William A. Pederson, President
              ("Pilot")

                                       16
<PAGE>

EXHIBIT "D"

ITEMS INCLUDED IN TRAINING AND ORIENTATION
------------------------------------------

Training and orientation will begin within 5 business days of the date of
closing. PCC will make its staff available during normal business hours on or
before that date and the training and orientation activities listed below will
end not more than 30 days from that date.

The following items are included in the training and orientation services
provided by Pilot and WAP:

         1.       A maximum of 56 hours of time for all activities which are
                  listed below. Additional time will be billed at $145/hour.
                  Pilot will provide periodic updates of activities and time
                  spent via email to designated PC management.

         2.       One introductory trip to Encor Technologies, Eau Claire, WI
                  with designated PCC Staff member(s) to meet Encor staff, see
                  how molds are currently designed and how plastic components
                  are currently produced. Pilot will provide ground
                  transportation to and from Eau Claire.

         3.       One introductory trip to Eagan Technical Services, Mendota
                  Hts, MN with designated PCC Staff member(s) to meet ETS staff,
                  see how BookEndz units are currently assembled, tested, and
                  packaged.

         4.       Setup of BookEndz testing station at PCC and orientation of
                  designated PCC staff members on current testing procedures.

         5.       Orientation of designated PCC staff for current incoming
                  product inspection.

         6.       Meet with PCC purchasing to discuss BookEndz component Vendor
                  relations and component lead times, pricing, etc.

         7.       Meet with PCC technical staff members on physical, mechanical,
                  electrical and Macintosh operating system issues directly
                  related to BookEndz.

         8.       Meet with PC Sales Team on issues related to use of BookEndz,
                  BookEndz sales screening, provide a list of pre-sales and post
                  sales questions, and introduce PC web page features and PCC
                  web support.

         9.       Meet with PC Accounting personnel relative to how Pilot has
                  established terms with accounts.

         10.      Meet with PC Marketing/Advertising personnel relative to
                  current ad materials, existing and future ad placement, future
                  trade shows, and advertising options.

         11.      Set up a 2 workstation Macintosh network, hardware and
                  software (listed in EXHIBIT A) for access to Pilot's
                  historical data.

         12.      Work with PCC staff to identify necessary changes to Pilot's
                  web pages for use on the PCC web site.

         13.      Meet with designated PC management as requested by PC or Pilot
                  Technologies, Inc. for progress updates and notice of
                  completion of Training and Orientation.

The following items are not included in the training and orientation services
provided by Pilot Technologies, Inc. on each of the new projects:

         1. Expenses or travel not specifically mentioned in the list above.

                                       17
<PAGE>

EXHIBIT "E"

ASSIGNMENT OF PATENT
--------------------

WHEREAS, Pilot Technologies, Inc., a corporation of the State of Minnesota
having is principal place of business at 11012 Jackson Drive, Eden Prairie,
Minnesota 55347, is the sole and exclusive owner, by assignment, of the
following letters patent (the "Patent"):

UNITED STATES LETTERS PATENT
----------------------------

NUMBER            DATE OF ISSUE         TITLE                INVENTORS
--------------------------------------------------------------------------------
5,186,646         February 16, 1993     Connector Device     William A. Pederson
                                        for Computers

WHEREAS, Photo Control Corporation, a corporation of the State of Minnesota,
having its principal place of business at 4800 Quebec Ave. North, Minneapolis,
MN 55428 is desirous of acquiring the entire right, title and interest in, to
and under the said letters patent, and the inventions covered thereby:

NOW, THEREFORE, in consideration of the sum of One Dollar to it in hand paid by
Photo Control Corporation, and other good and valuable consideration, the
receipt of which is hereby acknowledged, Pilot Technologies, Inc. has sold,
assigned, transferred and set over, and does hereby sell, assign, transfer and
set over to Photo Control Corporation all rights, title and interest in and to
the Patent, for its own use and benefit, and for the use and benefit of its
heirs, successors, assigns or other legal representatives, to the end of the
term or terms for which said letters patent are or may be granted or reissued
and fully and entirely as the same would have been held and enjoyed by Pilot
Technologies, Inc. if this assignment and sale had not been made; together with
all claims for damages by reason of past infringement of said letters patent,
with the right to sue for, and collect the same for his own use and benefit, and
for the use and benefit of its successors, assigns or other legal
representatives.

And Pilot Technologies, Inc. hereby authorizes and request the Commissioner of
Patents to issue and record any and all letters patent of the United States and
any continuation, divisional and reissue on said inventions or resulting from
said applications or any division or divisions thereof to Photo Control
Corporation, as assignee of the entire interest.

IN WITNESS WHEREOF, Pilot Technologies, Inc. has caused this instrument of
assignment to be executed in its behalf by its duly authorized officer on this
____th day of __________, 20___.

PILOT TECHNOLOGIES, INC.

By: ______________________________
    William A. Pederson, President

STATE OF _____________________   )
                                 )  ss.
COUNTY OF ____________________   )

                                       18
<PAGE>

On this ____th day of ____________, 20__, before me appeared William A.
Pederson, to me personally known, who, being by me duly sworn, did say that he
is President of Pilot Technologies, Inc., and that the said instrument was
signed on behalf of the said corporation by authority of its Board of Directors;
and the said William A. Pederson acknowledged the said instrument to be the free
act and deed of the said corporation.

-------------------------------
Notary Public

My Appointment Expires: ________________

                                       19
<PAGE>

EXHIBIT "F"

ASSIGNMENT OF TRADEMARK
-----------------------

WHEREAS, Pilot Technologies, Inc., a Minnesota corporation, having its principal
offices at 11012 Jackson Drive, Eden Prairie, Minnesota 55347, has adopted, used
and is using, and is the owner of the following trademark now registered in the
United States Patent and Trademark Office:

Service Mark                 Registration No.               Date of Registration
--------------------------------------------------------------------------------
BookEndz(R)                  1,798,548                      October 12, 1993

WHEREAS, Photo Control Corporation, a corporation of the State of Minnesota,
having its principal place of business at 4800 Quebec Ave. North, Minneapolis,
MN 55428, is desirous of acquiring the trademark:

NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged, Pilot Technologies, Inc. hereby sells, conveys, assigns and
transfers to Photo Control Corporation, all right, title and interest in and to
the trademark, together with all the goodwill of the business symbolized by said
trademark and registrations thereof, free and clear of any conditional sales
contract, charge, lien or encumbrance. Pilot Technologies, Inc. shall execute
all necessary documents to effectively complete such transfers.

PILOT TECHNOLOGIES, INC.

By:   ______________________________
      William A. Pederson, President

Date: ______________________________

STATE OF _____________________   )
                                 )  ss.
COUNTY OF ____________________   )

On this ____th day of ____________, 20__, before me appeared William A.
Pederson, to me personally known, who, being by me duly sworn, did say that he
is President of Pilot Technologies, Inc., and that the said instrument was
signed on behalf of the said corporation by authority of its Board of Directors;
and the said William A. Pederson acknowledged the said instrument to be the free
act and deed of the said corporation.

-------------------------------
Notary Public

My Appointment Expires: ________________

                                       20
<PAGE>

EXHIBIT "G"

CORPORATE ACTION BY CONSENT OF THE
----------------------------------
BOARD OF DIRECTORS AND SHAREHOLDERS
-----------------------------------
OF PILOT TECHNOLOGIES, INC.
---------------------------

As permitted by law, the undersigned Shareholders, being all of the Shareholders
of the above corporation, unanimously adopt the following corporate action(s)
without a meeting.

I. AUTHORIZATION OF CORPORATE ACTION. The officers and directors are authorized
to take all actions and to sign all documents reasonably needed to:

         Sell the Product Family "BookEndz", including all assets related to the
         Product Family, US Patent 5,186,646, and the Trademark No. 1,798,548,
         "BookEndz".

/s/ William A. Pederson
-----------------------
William A. Pederson
Shareholder

10-19-2000
-----------------------
Date

/s/ Elaine M. Pederson
-----------------------
Elaine M. Pederson
Shareholder

10-19-2000
-----------------------
Date

                                       21Exhibit 10.1

                                ATS MEDICAL, INC.
                            2000 STOCK INCENTIVE PLAN

Section 1. Purpose.

         The purpose of the Plan is to promote the interests of the Company and
its shareholders by aiding the Company in attracting and retaining employees,
officers, consultants, independent contractors and non-employee directors
capable of assuring the future success of the Company, to offer such persons
incentives to put forth maximum efforts for the success of the Company's
business and to afford such persons an opportunity to acquire a proprietary
interest in the Company.

Section 2. Definitions.

         As used in the Plan, the following terms shall have the meanings set
forth below:

                  (a) "Affiliate" shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each
case as determined by the Committee.

                  (b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Other Stock Grant or
Other Stock-Based Award granted under the Plan.

                  (c) "Award Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Award granted under the
Plan.

                  (d) "Board" shall mean the Board of Directors of the Company.

                  (e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.

                  (f) "Committee" shall mean a committee of Directors designated
by the Board to administer the Plan. The Committee shall be comprised of not
less than such number of Directors as shall be required to permit Awards granted
under the Plan to qualify under Rule 16b-3, and each member of the Committee
shall be a "Non-Employee Director" within the meaning of Rule 16b-3 and an
"outside director" within the meaning of Section 162(m) of the Code. The Company
expects to have the Plan administered in accordance with the requirements for
the award of "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code.

                  (g) "Company" shall mean ATS Medical, Inc., a Minnesota
corporation, and any successor corporation.

<PAGE>

                  (h) "Director" shall mean a member of the Board.

                  (i) "Eligible Person" shall mean any employee, officer,
consultant, independent contractor or Director providing services to the Company
or any Affiliate whom the Committee determines to be an Eligible Person.

                  (j) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities), the
fair market value of such property determined by such methods or procedures as
shall be established from time to time by the Committee. Notwithstanding the
foregoing, unless otherwise determined by the Committee, the Fair Market Value
of Shares as of a given date shall be, if the Shares are then quoted on the
NASDAQ National Market System, the closing price as reported on the NASDAQ
National Market System on such date or, if the NASDAQ National Market System is
not open for trading on such date, on the most recent preceding date when it is
open for trading.

                  (k) "Incentive Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision.

                  (l) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.

                  (m) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option, and shall include Reload Options.

                  (n) "Other Stock Grant" shall mean any right granted under
Section 6(e) of the Plan.

                  (o) "Other Stock-Based Award" shall mean any right granted
under Section 6(f) of the Plan.

                  (p) "Participant" shall mean an Eligible Person designated to
be granted an Award under the Plan.

                  (q) "Performance Award" shall mean any right granted under
Section 6(d) of the Plan.

                  (r) "Person" shall mean any individual, corporation,
partnership, association or trust.

                  (s) "Plan" shall mean the ATS Medical, Inc. 2000 Stock
Incentive Plan, as amended from time to time, the provisions of which are set
forth herein.

                  (t) "Reload Option" shall mean any Option granted under
Section 6(a)(iv) of the Plan.

<PAGE>

                  (u) "Restricted Stock" shall mean any Shares granted under
Section 6(c) of the Plan.

                  (v) "Restricted Stock Unit" shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.

                  (w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation.

                  (x) "Shares" shall mean shares of Common Stock, $.01 par value
per share, of the Company or such other securities or property as may become
subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.

                  (y) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.

Section 3. Administration.

                  (a) Power and Authority of the Committee. The Plan shall be
administered by the Committee. Subject to the express provisions of the Plan and
to applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to each Participant under the Plan; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, promissory
notes, other securities, other Awards, other property and other amounts payable
with respect to an Award under the Plan shall be deferred either automatically
or at the election of the holder thereof or the Committee; (viii) interpret and
administer the Plan and any instrument or agreement, including an Award
Agreement, relating to the Plan; (ix) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (x) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant, any holder or beneficiary of any Award and any employee of
the Company or any Affiliate.

<PAGE>

                  (b) Delegation. The Committee may delegate its powers and
duties under the Plan to one or more Directors or a committee of Directors,
subject to such terms, conditions and limitations as the Committee may establish
in its sole discretion.

                  (c) Power and Authority of the Board of Directors.
Notwithstanding anything to the contrary contained herein, the Board may, at any
time and from time to time, without any further action of the Committee,
exercise the powers and duties of the Committee under the Plan.

Section 4. Shares Available for Awards.

                  (a) Shares Available. Subject to adjustment as provided in
Section 4(c) of the Plan, the aggregate number of Shares that may be issued
under all Awards under the Plan shall be 1,000,000. Shares to be issued under
the Plan may be either authorized but unissued Shares or Shares acquired in the
open market or otherwise. Any Shares that are used by a Participant as full or
partial payment to the Company of the purchase price relating to an Award, or in
connection with the satisfaction of tax obligations relating to an Award, shall
again be available for granting Awards (other than Incentive Stock Options)
under the Plan. In addition, if any Shares covered by an Award or to which an
Award relates are not purchased or are forfeited, or if an Award otherwise
terminates without delivery of any Shares, then the number of Shares counted
against the aggregate number of Shares available under the Plan with respect to
such Award, to the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan. Notwithstanding the foregoing, the
number of Shares available for granting Incentive Stock Options under the Plan
shall not exceed 1,000,000, subject to adjustment as provided in the Plan and
subject to the provisions of Section 422 or 424 of the Code or any successor
provision.

                  (b) Accounting for Awards. For purposes of this Section 4, if
an Award entitles the holder thereof to receive or purchase Shares, the number
of Shares covered by such Award or to which such Award relates shall be counted
on the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan.

                  (c) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or other property) that
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and (iii)
the purchase or exercise price with respect to any Award; provided, however,
that the number of Shares covered by any Award or to which such Award relates
shall always be a whole number.

<PAGE>

                  (d) Award Limitations Under the Plan. No Eligible Person may
be granted any Award or Awards under the Plan, the value of which Award or
Awards is based solely on an increase in the value of the Shares after the date
of grant of such Award or Awards, for more than 300,000 Shares (subject to
adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any
calendar year. The foregoing annual limitation specifically includes the grant
of any Award or Awards representing "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.

Section 5. Eligibility.

         Any Eligible Person shall be eligible to be designated a Participant.
In determining which Eligible Persons shall receive an Award and the terms of
any Award, the Committee may take into account the nature of the services
rendered by the respective Eligible Persons, their present and potential
contributions to the success of the Company or such other factors as the
Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
Directors who are also employees), and an Incentive Stock Option shall not be
granted to an employee of an Affiliate unless such Affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision.

Section 6. Awards.

                  (a) Options. The Committee is hereby authorized to grant
Options to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:

                           (i) Exercise Price. The purchase price per Share for
all Incentive Stock Options granted under the Plan shall be determined by the
Committee; provided, however, that such purchase price shall not be less than
100% of the Fair Market Value of the Shares on the date of grant of such Option.
The purchase price per share for Options granted under the Plan that do not
qualify as Incentive Stock Options shall also be determined by the Committee;
provided, however, that such purchase price shall not be less than 50% of the
Fair Market Value of a Share on the date of grant of such Option.

                           (ii) Option Term. The term of each Option shall be
fixed by the Committee.

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

<PAGE>

                           (iv) Reload Options. The Committee may grant Reload
Options, separately or together with another Option, pursuant to which, subject
to the terms and conditions established by the Committee, the Participant would
be granted a new Option when the payment of the exercise price of a previously
granted option is made by the delivery of Shares owned by the Participant
pursuant to Section 6(a)(iii) of the Plan or the relevant provisions of another
plan of the Company, and/or when Shares are tendered or withheld as payment of
the amount to be withheld under applicable income tax laws in connection with
the exercise of an Option, which new Option would be an Option to purchase the
number of Shares not exceeding the sum of (A) the number of Shares so provided
as consideration upon the exercise of the previously granted option to which
such Reload Option relates and (B) the number of Shares, if any, tendered or
withheld as payment of the amount to be withheld under applicable tax laws in
connection with the exercise of the option to which such Reload Option relates
pursuant to the relevant provisions of the plan or agreement relating to such
option. Reload Options may be granted with respect to Options previously granted
under the Plan or any other stock option plan of the Company or may be granted
in connection with any Option granted under the Plan or any other stock option
plan of the Company at the time of such grant. Such Reload Options shall have a
per share exercise price equal to the Fair Market Value of one Share as of the
date of grant of the new Option. Any Reload Option shall be subject to
availability of sufficient Shares for grant under the Plan.

                  (b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants subject to the
terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to receive
upon exercise thereof the excess of (i) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over (ii) the
grant price of the Stock Appreciation Right as specified by the Committee, which
price shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions of
any Stock Appreciation Right shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.

                  (c) Restricted Stock and Restricted Stock Units. The Committee
is hereby authorized to grant Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

                           (i) Restrictions. Shares of Restricted Stock and
Restricted Stock Units shall be subject to such restrictions as the Committee
may impose (including, without limitation, a waiver by the Participant of the
right to vote or to receive any dividend or other right or property with respect
thereto), which restrictions may lapse separately or in combination at such time
or times, in such installments or otherwise as the Committee may deem
appropriate.

<PAGE>

                           (ii) Stock Certificates. Any Restricted Stock granted
under the Plan shall be registered in the name of the Participant and shall bear
an appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock. In the case of Restricted Stock Units, no
Shares shall be issued at the time such Awards are granted.

                           (iii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment (as determined under criteria
established by the Committee) during the applicable restriction period, all
Shares of Restricted Stock and all Restricted Stock Units at such time subject
to restriction shall be forfeited and reacquired by the Company; provided,
however, that the Committee may, 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 Shares of Restricted Stock or Restricted Stock
Units. Upon the lapse or waiver of restrictions and the restricted period
relating to Restricted Stock Units evidencing the right to receive Shares, such
Shares shall be issued and delivered to the holders of the Restricted Stock
Units.

                  (d) Performance Awards. The Committee is hereby authorized to
grant Performance Awards to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Performance Award granted under the Plan (i)
may be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock and Restricted Stock Units), other securities, other Awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to the
terms of the 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, the amount of any payment or
transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee.

                  (e) Other Stock Grants. The Committee is hereby authorized,
subject to the terms of the Plan and any applicable Award Agreement, to grant to
Participants Shares without restrictions thereon as are deemed by the Committee
to be consistent with the purpose of the Plan.

                  (f) Other Stock-Based Awards. The Committee is hereby
authorized to grant to Participants subject to the terms of the Plan and any
applicable Award Agreement, such other Awards that are denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or related
to, Shares (including, without limitation, securities convertible into Shares),
as are deemed by the Committee to be consistent with the purpose of the Plan.
Shares or other securities delivered pursuant to a purchase right granted under
this Section 6(f) shall be purchased for such consideration, which may be paid
by such method or methods and in such form or forms (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards or
other property or any combination thereof), as the Committee shall determine,
the value of which consideration, as established by the Committee, shall not be
less than 100% of the Fair Market Value of such Shares or other securities as of
the date such purchase right is granted.

<PAGE>

                  (g) General.

                           (i) No Cash Consideration for Awards. Awards shall be
granted for no cash consideration or for such minimal cash consideration as may
be required by applicable law.

                           (ii) Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with or in substitution for any other Award or any award
granted under any plan of the Company or any Affiliate other than the Plan.
Awards granted in addition to or in tandem with other Awards or in addition to
or in tandem with awards granted under any such other plan of the Company or any
Affiliate may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.

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

                           (iv) Limits on Transfer of Awards. No Award (other
than Other Stock Grants) and no right under any such Award shall be transferable
by a Participant otherwise than by will or by the laws of descent and
distribution; provided, however, that, if so determined by the Committee, a
Participant may, in the manner established by the Committee, transfer Options
(other than Incentive Stock Options) or designate a beneficiary or beneficiaries
to exercise the rights of the Participant and receive any property distributable
with respect to any Award upon the death of the Participant. Each Award or right
under any Award shall be exercisable during the Participant's lifetime only by
the Participant or, if permissible under applicable law, by the Participant's
guardian or legal representative. No Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.

                           (v) Term of Awards. The term of each Award shall be
for such period as may be determined by the Committee.

                           (vi) Restrictions; Securities Exchange Listing. All
Shares or other securities delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such restrictions as the Committee may deem
advisable under the Plan, applicable federal or state securities laws and
regulatory requirements, and the Committee may cause appropriate entries to be
made or legends to be affixed to reflect such restrictions. If any securities of
the

<PAGE>

Company are traded on a securities exchange, the Company shall not be required
to deliver any Shares or other securities covered by an Award unless and until
such Shares or other securities have been admitted for trading on such
securities exchange.

Section 7. Automatic Grants to Non-Employee Directors

         Upon such person's initial election to the Board, each director who is
not an employee or consultant to the Company shall receive a Non-Qualified Stock
Option to purchase 5,000 Shares. Thereafter, upon each re-election to the Board,
such director shall receive a Non-Qualified Stock Option to purchase 2,500
Shares. The Option shall have an exercise price equal to the Fair Market Value
of the Shares on the day of election. The Options shall have a ten year term and
shall vest in full six months following the date of grant. This Section 7 may
not be amended more than once every six months, other than to comport with
changes in the Code or the rules thereunder.

Section 8. Amendment and Termination; Adjustments.

                  (a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue or terminate the Plan at any time; provided, however, that,
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:

                           (i) would violate the rules or regulations of the
NASDAQ National Market System or any securities exchange that are applicable to
the Company; or

                           (ii) would cause the Company to be unable, under the
Code, to grant Incentive Stock Options under the Plan.

                  (b) Amendments to Awards. Except for Awards granted pursuant
to Section 7, the Committee may waive any conditions of or rights of the Company
under any outstanding Award, prospectively or retroactively. Except as otherwise
provided herein or in the Award Agreement, the Committee may not amend, alter,
suspend, discontinue or terminate any outstanding Award, prospectively or
retroactively, if such action would adversely affect the rights of the holder of
such Award, without the consent of the Participant or holder or beneficiary
thereof.

                  (c) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.

Section 9. Income Tax Withholding; Tax Bonuses.

                  (a) Withholding. 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

<PAGE>

the sole and absolute responsibility of a Participant, are withheld or collected
from such Participant. In order to assist a Participant in paying all or a
portion of the federal and state taxes to be withheld or collected upon exercise
or receipt of (or the lapse of restrictions relating to) an Award, the
Committee, in its discretion and subject to such additional terms and conditions
as it may adopt, may permit the Participant to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the Shares otherwise to
be delivered upon exercise or receipt of (or the lapse of restrictions relating
to) such Award with a Fair Market Value equal to the amount of such taxes or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.

                  (b) Tax Bonuses. The Committee, in its discretion, shall have
the authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.

Section 10. General Provisions.

                  (a) No Rights to Awards. No Eligible Person, Participant or
other Person shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Eligible Persons,
Participants or holders or beneficiaries of Awards under the Plan. The terms and
conditions of Awards need not be the same with respect to any Participant or
with respect to different Participants.

                  (b) Award Agreements. No Participant will have rights under an
Award granted to such Participant unless and until an Award Agreement shall have
been duly executed on behalf of the Company and, if requested by the Company,
signed by the Participant.

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

                  (d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, nor will it affect in any way the right of the Company
or an Affiliate to terminate such employment at any time, with or without cause.
In addition, the Company or an Affiliate may at any time dismiss a Participant
from employment free from any liability or any claim under the Plan or any
Award, unless otherwise expressly provided in the Plan or in any Award
Agreement.

                  (e) Governing Law. The validity, construction and effect of
the Plan or any Award, and any rules and regulations relating to the Plan or any
Award, shall be determined in accordance with the laws of the State of
Minnesota.

<PAGE>

                  (f) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the purpose
or intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.

                  (g) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.

                  (h) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

                  (i) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.

Section 11. Effective Date of the Plan.

         The Plan shall be effective when first approved by the shareholders of
the Company.

Section 12. Term of the Plan.

         No Award shall be granted under the Plan after December 31, 2010 or any
earlier date of discontinuation or termination established pursuant to Section
8(a) of the Plan. However, unless otherwise expressly provided in the Plan or in
an applicable Award Agreement, any Award theretofore granted may extend beyond
such date.

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