Document:

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                                                                   EXHIBIT 10.12

                     EMPLOYMENT AND NONCOMPETITION AGREEMENT

         This Agreement is effective as of June 11, 2001, and is between John W.
Potter, (the "Employee"), and Oxford Automotive, Inc., a Michigan corporation
(the "Company").

         In consideration of the premises herein contained, the parties agree as
follows:

         1.   Employment. The Company employs you, the Employee, as an executive
officer of the Company, your specific title to be determined between you and the
Chairman of the Board of Directors of the Company, and you accept such
employment, upon the terms and conditions set forth in this Agreement.

         2.   Duties During Employment Period. You shall perform and discharge
well and faithfully such duties for the Company and any of its subsidiaries as
may be assigned to you from time to time by the Board of Directors (the "Board")
or Chairman of the Board (the "Chairman") of the Company and, in the absence of
such assignment, such services customary to such office as are necessary to the
operations of the Company. Such duties shall include:

         -    Building the Company as a leader in the automotive metal forming
              industry globally;

         -    Developing and meeting growth oriented business and financial
              plans and objectives;

         -    Building existing North American and European businesses;

         -    Integrating new North American, South American, Asian and European
              acquisitions into the Company's business;

         -    Effectively building a global management team;

         -    Managing and meeting financial expectations of the board of
              directors, bank groups, and investors; and

         -    Representing the Company in industry group activities, press
              relations and investor activities.

         You shall report to the Chairman, or such other person as the Board may
from time to time designate, at such times and in such detail as the Chairman
shall require and you shall devote all of your business time, attention and
energies to the business of the Company and its subsidiaries. The Company
acknowledges your continuing service as a director of Vitec, Inc.

         3.   Term. Your employment under Sections 1 and 2 of this Agreement
shall commence on the date hereof and shall terminate as provided in Section 9
below (the "Employment Period"). Your employment with the Company shall be
terminable at will and you and the Company shall have the right to terminate
your employment with or without cause in accordance with Section 9 below.

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         4.   Employment Period Compensation.

              (a)  Base Salary. For all services to be rendered by you hereunder
(including services as director, officer, employee, member of any committee of
the Company or any subsidiary or division or otherwise), the Company shall pay
to you during the Employment Period an annual salary of $500,000 ("Annual Base
Salary"), payable in bi-weekly installments in accordance with the payroll
practices of the Company, as such may exist from time to time. The Board may, at
its option, make such additional salary increases as they deem appropriate in
light of your performance and the Company's performance. All payments shall be
subject to all applicable taxes required to be withheld by the Company pursuant
to federal, state or local law.

              (b)  Other Benefits. The Company shall provide you with the fringe
benefits, perquisites, and other benefits of employment provided to executive
officers of the Company from time to time during the Employment Period, subject
to the generally applicable eligibility and other provisions of the various
plans and programs in effect from time to time. These benefits will be adjusted
from time to time as determined by the Board, as such benefits may be adjusted
for general application among all executive officers.

              (c)  Automobile Allowance. The Company shall provide you with the
use of a an automobile or an automobile allowance during the Employment Period,
in connection with the services to be rendered by you hereunder, which shall be
on terms comparable to that provided to the other executive officers of the
Company.

              (d)  Contingent Bonus. After each fiscal year that ends during the
Employment Period, the Board will consider granting to you a bonus, in such
amount (if any) up to 50% of your Annual Base Salary as the Board may determine
in its sole discretion. The Board expects to base its decisions with respect to
bonus payments, if any, on corporate financial and strategic objectives
(approximately 80%) and agreed to personal goals (approximately 20%).

              (e)  Vacation. You shall be entitled to four weeks paid vacation
during each calendar year of the Employment Period, to be taken at such times as
shall not, in the reasonable judgment of the Chairman, materially interfere with
the fulfillment of your duties under this Agreement. Unused vacation time may
not be carried over to the following year. You shall also be entitled to as many
holidays and personal days as are in accordance with the Company's policy then
in effect for its employees generally, upon such terms as may be provided for
general application to all employees of the Company.

              (f)  Moving Allowance. You shall be entitled to a one-time
reimbursement for any moving expenses, pre-approved by the Chairman or Vice
Chairman of the Company, for you and your immediate family, up to a maximum of
$50,000.

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         5.   Confidential Information, Improvements, Etc.

              (a)  Disclosure of Information. You understand and agree that the
Confidential Information (as hereinafter defined) used in the business of the
Company or its affiliates is a valuable, special and unique asset of the Company
and shall be and remain the sole and exclusive property of the Company.
Accordingly, you agree that you will not, during or after your employment with
the Company, take from the Company's premises, or directly or indirectly
reproduce, use, disclose or reveal said Confidential Information to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, except as required in connection with the performance of your duties
under this Agreement or as required by law or under court order or as authorized
in writing by the Company; and further agree that you will never use any such
Confidential Information for any purpose other than in fulfillment of your
employment duties with the Company. In the event of the termination of your
employment, you agree to immediately deliver to the Company all written
materials in your possession regarding said Confidential Information and not
retain or transfer any copies thereof.

              (b)  Confidential Information. "Confidential Information" as used
herein, means:

                   (i)   the terms and conditions of any business transaction
that the Company or any of its subsidiaries has performed or has offered to
perform with any customer or prospective customer while you have been employed
by the Company or which you learned of while employed by the Company or any of
its subsidiaries;

                   (ii)  any forms, business plans, manuals, operating
procedures and policies of the Company or any of its subsidiaries;

                   (iii) any other facts or data that are treated as
confidential and proprietary by the Company or any of its subsidiaries and that
are disclosed to or learned by you during your employment with the Company;

                   (iv)  any documents that relate to, refer to, are involved
with, summarize, embody or constitute the Confidential Information defined in
this paragraph (b) ("documents", as used herein means forms, manuals,
compilations of data, summaries, printouts, contracts, agreements,
correspondence, memoranda, notes, files, invoices, price lists, data bases and
all copies thereof, of any kind whatsoever, whether typewritten, handwritten or
recorded electronically).

         (c)  Improvements, Etc. You will treat as for the sole benefit of the
Company, and fully and promptly disclose and assign to the Company without
additional "future" compensation, all ideas, discoveries, inventions and
improvements, whether patentable or not, which relate to the business, or
activities of the Company or any of its subsidiaries or which result from or
relate to the subject matter of any work which you may do for, on the premises
of, at the expense of, or on behalf of the Company or any of its subsidiaries,
and which are or have been made, conceived or reduced

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to practice by you, alone or jointly with others, during or after usual working
hours, either on or off your job, while you are employed by the Company.

                   At the Company's expense, at any time during or after such
employment, you will sign all papers and do such other acts as the Company deems
necessary or desirable or may reasonably require of you to assign and protect
the Company's or its nominee's rights to such ideas, discoveries, inventions and
improvements, including applying for, obtaining and enforcing patents,
trademarks or copyrights on such ideas, discoveries, inventions and improvements
in any and all countries of the world.

              (d)  Notice. This confidentiality covenant shall not in any way
limit or restrict you from obtaining or maintaining employment in the industry
in which the Company operates, it is specifically intended to restrict and
prohibit you from using Confidential Information obtained during your
employment. The Company is concerned that you might subsequently use
Confidential Information obtained during your employment, to the Company's or
its officers, directors, and shareholders' detriment. So that your subsequent
employers are aware of this confidentiality covenant, you agree that during the
Restricted Period as described in Subsection (e) below, you shall inform all
future employers of said covenant.

              (e)  Restricted Period. As used herein, the term "Restricted
Period" shall mean the period commencing with the date hereof and ending on the
date that is two years after the termination of your employment with the
Company.

         6.   Business Relationships. You understand and agree that establishing
business relationships with representatives of the organizations served by the
Company is a demanding difficult procedure requiring a great deal of time,
effort and money, and requires the building of confidence and goodwill, and that
the Company should have the right to hold such established business
relationships as its own. You therefore agree that during the Restricted Period,
except when acting on behalf of the Company, you will not, directly or
indirectly, request or advise any client or prospective client of the Company to
withhold, curtail or cancel their business with the Company. In addition, you
agree that with respect to the Business Activities (defined below), you will not
directly or indirectly call on, or solicit any client or prospective client of
the Company whose identity as such client or prospective client, first became
known to you through your employment with the Company, whether before or after
this agreement is signed, whether the relationship was developed by you or not.

         7.   Covenant Not To Compete.

              (a)  Noncompetition. You acknowledge that the services to be
provided hereunder are unique and that their loss would cause irreparable injury
to the Company. You also hereby acknowledge and recognize the highly competitive
nature of the Company's business and, accordingly, in consideration of your
employment by the Company, you agree to the following:

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                   (i)   That during the Restricted Period, you will not,
directly or indirectly (other than on behalf of the Company), engage in the
design, development, manufacture, sale, marketing or servicing of products or
provision of services which at any time heretofore or hereafter during your
employment with the Company were designed, developed, manufactured, sold,
marketed, serviced or provided by the Company; or engage in any activity which
is in competition with the activities of the Company (the "Business Activities")
whether such engagement is as an officer, director, proprietor, employee,
partner, investor (other than as a holder of less than 5% of the outstanding
capital stock of a publicly traded corporation), consultant, advisor, agent or
otherwise, in any geographic area in which at any time prior to or during your
employment with the Company the products or services of the Company were
distributed or provided by the Company or in which the Company has competed.

                   (ii)  That during the Restricted Period, you will not,
directly or indirectly, engage in any Business Activities (other than on behalf
of the Company) by supplying products or providing services which at any time
prior to or during your employment with the Company were supplied or provided by
the Company to any customer, client or prospective client with whom the Company
at any time prior to or during your employment with the Company has done any
business, whether as an officer, director, proprietor, employee, partner,
investor (other than as a holder of less than 5% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise.

                   (iii) During the Restricted Period you will not directly or
indirectly solicit, for your own account or for the account of any other person
or entity other than the Company, induce or influence any client, prospective
client, customer, supplier, lender, lessor or any other person which has a
business relationship with the Company at any time during the Restricted Period
to discontinue or reduce the extent of such relationship with the Company.

                   (iv)  During the Restricted Period, you will not (A) directly
or indirectly recruit, solicit or otherwise induce or influence any employee or
sales agent of the Company to discontinue such employment or agency relationship
with the Company, or (B) employ or seek to employ, or cause or permit any
business which competes directly or indirectly with the Business Activities (the
"Competitive Business") to employ or seek to employ for any Competitive
Business, any person who is then (or was at any time within six months prior to
the date either you or the Competitive Business employs or seeks to employ such
person) employed by the Company.

         8.   Remedies. You acknowledge and agree that the Company's remedy at
law for a breach or threatened breach of any of the provisions of Sections 5, 6
or 7 would be inadequate. In recognition of this fact, in the event of a breach
by you of any of the provisions of Sections 5, 6 or 7 as determined by the
Company in its sole discretion acting in good faith, you agree that, in addition
to its remedy at law, all of your rights to payment or otherwise under this
Agreement and all amounts then or thereafter due to you from the Company under
this Agreement may be terminated, upon a final determination that there was such
a breach in accordance with Section 18 hereof, provided, however, that the
Company shall not be required to pay any amount hereunder prior to such final

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determination, except upon receipt of an agreement by you to repay such amount
which you are ultimately determined not to be entitled. In addition, the
Company, without posting any bond, shall be entitled to obtain equitable relief
in the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach.

         9.   Termination.

              (a)  Employment. This Agreement shall terminate upon the first to
occur of: (i) receipt by you from the Company of notice that the Company has in
its discretion elected to terminate your employment without cause, for any
reason or no reason, in which case, (A) if notice of such termination is
provided to you within 12 months of the date hereof you shall receive, as
severance pay, an amount equal to 1/2 of your Annual Base Salary, payable in
equal monthly installments over a period of 6 months, provided, however, that
the Company's obligation to make such payments may be reduced by the Company to
the extent of all payments you receive from another employer during the period
you are entitled to receive severance payments, and such compensation in each
such case shall be the only compensation you shall be entitled to in connection
with such termination, (B) if notice of such termination is provided to you
after 12 months from the date hereof but within 24 months of the date hereof,
you shall receive, as severance pay, an amount equal to 1/4 of your Annual Base
Salary, payable in equal monthly installments over a period of 3 months,
provided, however, that the Company's obligation to make such payments may be
reduced by the Company to the extent of all payments you receive from another
employer during the period you are entitled to receive severance payments, and
such compensation in each such case shall be the only compensation you shall be
entitled to in connection with such termination, and (C) if notice of such
termination is provided to you after 24 months from the date hereof you shall
not receive any severance pay, (ii) your death, (iii) at the option of the
Company, your Disability, and for purposes of this Agreement, the term
"Disability" shall be deemed to have occurred upon written notice to you (or
your guardian or other person, if any, who has then been placed in charge of
your affairs) by the Company given at any time that you shall have failed,
because of illness or incapacity, for a period of 90 consecutive days, or for an
aggregate period of at least 120 days during the preceding 12 month period, to
render services of the character rendered by you for the Company prior to such
illness or incapacity (the date of such Disability shall be deemed to be the
fifth business day following the date of such notice), (iv) receipt by the
Company from you of notice, given not later than 180 days prior to the date of
termination, that you have elected to terminate your employment, or (v) your
discharge by the Board for cause. For purposes of this Agreement, an event or
occurrence constituting "cause" shall mean your dishonesty or insubordination,
your violation of any material Company policies, your conviction for any felony
or for a crime involving fraud or misrepresentation, your deliberate conduct,
engaged in without the prior approval of the Board, resulting in a material loss
to the Company or theft from the Company, your gross neglect or willful
misconduct in connection with the performance of your duties hereunder, or a
material violation by you of any of the provisions of this Agreement.

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              (b)  Obligations. In the event of termination of employment for
any reason specified in paragraph (a)(ii), (iii), (iv) or (v) hereof, the
Company shall no longer be obligated to make any salary payments or other
benefits of any kind whatsoever to you or your estate other than any vested
employee benefits required by law to be provided by the Company. However, any
salary payments earned but not yet made shall be pro rated on a daily basis and
made by the Company to you or your estate. You recognize and understand that all
oral representations, prior, contemporaneous or subsequent to the execution of
this Agreement are not to be relied upon and that nothing contained in any
document published or to be published by the Company shall in any way modify the
above terms regarding termination.

         10.  Notices. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and if mailed by
registered or certified mail, postage prepaid with return receipt requested or
sent by express courier service, charges prepaid by shipper, to your residence
address as evidenced in the Company records, or to the principal offices of the
Company, to the attention of the Chairman, in the case of notices to the Company
(or to such other address as a party is directed pursuant to written notice from
the other party). Any notice given by the Company to you at your last directed
address shall be effective to bind any other person who shall acquire rights
hereunder.

         11.  Assignment. This Agreement may not be assigned by you but may be
assigned by the Company.

         12.  Entire Agreement; Waiver. This instrument contains the entire
Agreement of the parties relating to the subject matter hereof, supersedes and
replaces any other existing employment agreements, whether oral or in writing,
and may not be waived, changed, modified, extended or discharged orally but only
by agreement in writing signed by you and the Chairman. The waiver by the
Company of a breach of any provision of this Agreement by you shall not operate
or be construed as a wavier of a breach of any other provision of this Agreement
or of any subsequent breach by you.

         13.  Survival of Terms.  Any termination of this Agreement shall not
affect the ongoing provisions of this Agreement, which shall survive such
termination in accordance with their respective terms.

         14.  Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan.

         15.  Headings. The headings of the sections are for convenience only
and shall not control or affect the meaning or construction or limit the scope
or intent of any of the provisions of this Agreement.

         16.  Validity. If for any reason any provision hereof shall be
determined to be invalid or unenforceable, the validity and effect of the other
provisions hereof shall not be affected thereby.

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         17.  Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

         18.  Arbitration. Except as expressly set forth in Section 8 of this
Agreement, it is mutually agreed between the parties that arbitration shall be
the sole and exclusive remedy to redress any dispute, claim or controversy
(hereinafter referred to as "grievance") involving the negotiation, execution,
performance or termination of this Agreement. It is the intention of the parties
that the arbitration award will be final and binding and that judgment on the
award may be entered in any court of competent jurisdiction and enforcement may
be had according to its terms. Arbitration may be initiated by either party by
filing a claim for arbitration with the American Arbitration Association. Any
claim must be filed within 6 months of the act or omission giving rise to the
claim.

              The arbitrator shall be chosen in accordance with the Voluntary
Labor Arbitration rules of the American Arbitration Association and the expenses
of the arbitration shall be shared equally by the Company and you. The place of
the arbitration shall be the offices of the American Arbitration Association in
Southfield, Michigan. The arbitrator shall not have jurisdiction or authority to
change any of the provisions of this Agreement by alterations, additions to or
subtractions from the terms thereof. The arbitrator's sole authority shall be to
interpret or apply any clause or clauses of this Agreement.

              The parties stipulate that the provisions hereof, and the decision
of the arbitrator with respect to any grievance, shall be the sole and exclusive
remedy for any alleged breach of this Agreement or any controversy involving the
negotiation, execution, performance or termination of this Agreement. The
parties hereby acknowledge that since arbitration is the exclusive remedy,
neither party has the right to resort to any federal, state or local court or
administrative agency and that the decision of the arbitrator shall be a
complete defense to any suit, action or proceeding instituted in any federal,
state or local court or before any administrative agency with respect to any
grievance which is arbitrable as herein set forth. The arbitration provisions
hereof shall, with respect to any grievance, survive the termination or
expiration of this Agreement.

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         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                            /s/ John W. Potter
                                           -------------------------------------
                                           Signature

                                           John W. Potter
                                           -------------------------------------
                                           Printed Name

                                           Oxford Automotive, Inc.,
                                           a Michigan corporation

                                           By:  /s/ Selwyn Isakow
                                               ---------------------------------
                                               Selwyn Isakow, Chairman

                                        9<PAGE>   1

                                                                     Exhibit 4.1

                                 SHELDAHL, INC.
                                 1994 STOCK PLAN

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<TABLE>
<CAPTION>
SECTION                    CONTENTS                                             PAGE
-------                    --------                                             ----
<S>               <C>                                                           <C>

   1.             General Purpose of Plan; Definitions                          A-3

   2.             Administration                                                A-5

   3.             Stock Subject to Plan                                         A-6

   4.             Eligibility                                                   A-7

   5.             Stock Options                                                 A-7

   6.             Stock Appreciation Rights                                     A-11

   7.             Restricted Stock                                              A-12

   8.             Deferred Stock Awards                                         A-14

   9.             Transfer, Leave of Absence, etc.                              A-15

  10.             Amendments and Termination                                    A-15

  11.             Unfunded Status of Plan                                       A-16

  12.             General Provisions                                            A-16

  13.             Effective Date of Plan                                        A-17
</TABLE>

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                                 SHELDAHL, INC.
                           1994 STOCK PLAN, AS AMENDED

SECTION 1.  General Purpose of Plan; Definitions.

         The name of this plan is the Sheldahl, Inc. 1994 Stock Plan (the
"Plan"). The purpose of the Plan is to enable Sheldahl, Inc. (the "Company") and
its Subsidiaries to retain and attract executives and other key employees,
consultants and non-employee directors who contribute to the Company's success
by their ability, ingenuity and industry, and to enable such individuals to
participate in the long-term success and growth of the Company by giving them a
proprietary interest in the Company.

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

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

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

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

         d.       "Committee" means a Committee with the membership referred to
                  in Section 2 of the Plan or the Board.

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

         f.       "Deferred Stock" means an award made pursuant to Section 8
                  below of the right to receive Stock at the end of a specified
                  deferral period.

         g.       "Disability" means permanent and total disability as
                  determined by the Committee.

         h.       "Disinterested Person" means a "non-employee director" as
                  defined in Rule 16b-3(b)(3)(i) as promulgated by the
                  Securities and Exchange Commission under the Securities Act of
                  1934, or any successor definitions adopted by the Commission.

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

         j.       "Fair Market Value" means the value of the Stock on a given
                  date as determined by the Committee in accordance with Section
                  422(c)(7) of the Code and any applicable Treasury Department
                  regulations promulgated thereunder.

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

         l.       "Non-Employee Director" means any member of the Board who is
                  not an employee of the Company, any Parent Corporation or
                  Subsidiary.

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

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

         o.       "Parent Corporation" means any corporation (other than the
                  Company) in an unbroken chain of corporations ending with the
                  Company if, at the time of the granting of a Stock Option,
                  each of the corporations (other than the Company) owns stock
                  possessing 50% or more of the total combined voting power of
                  all classes of stock in one of the other corporations in the
                  chain as provided in Section 424(e) of the Code.

         p.       "Restricted Stock" means an award of shares of Stock that are
                  subject to restrictions under Section 7 below.

         q.       "Retirement" means Normal Retirement or Early Retirement.

         r.       "Stock" means the Common Stock, $.25 par value per share, of
                  the Company.

         s.       "Stock Appreciation Right" means the right pursuant to an
                  award granted under Section 6 below to surrender to the
                  Company all or a portion of a Stock Option in exchange for an
                  amount equal to the difference between (i) the Fair Market
                  Value, as of the date such Stock Option or such portion
                  thereof is surrendered, of the shares of Stock covered by such
                  Stock Option or such portion thereof, and (ii) the aggregate
                  exercise price of such Stock Option or such portion thereof.

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

         u.       "Subsidiary" means any corporation (other than the Company) in
                  an unbroken chain of corporations beginning with the Company
                  if, at the time of the granting of a Stock Option, each of the
                  corporations (other than the last corporation in the unbroken
                  chain) owns stock possessing 50% or more of the total combined
                  voting power of all classes of stock in one of the other
                  corporations in the chain as provided in Section 424(f) of the
                  Code.

SECTION 2.  Administration.

         The Plan shall be administered by the Board of Directors or by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board of Directors of the Company and who shall serve at the pleasure of
the Board.

         The Committee shall have the power and authority to grant to eligible
persons, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock, or (iv) Deferred Stock awards.

         In particular, the Committee shall have the authority:

         (i)      to select the officers and other key employees of the Company
                  and its Subsidiaries, and consultants and other persons having
                  a contractual relationship with the Company or its
                  Subsidiaries, to whom Stock Options, Stock Appreciation

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                  Rights, Restricted Stock and/or Deferred Stock awards may from
                  time to time be granted hereunder;

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

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

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

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

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

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

SECTION 3.  Stock Subject to Plan.

         The total number of shares of common stock reserved and available for
distribution under the Plan shall be 4,500,000 shares. Such shares shall
consist, in whole or in part, of authorized and unissued shares.

         Subject to paragraph (b)(iv) of Section 6 below, if any shares that
have been optioned ceased to be subject to Options, or if any shares subject to
any Restricted Stock or Deferred Stock award granted hereunder are forfeited or
such award otherwise terminates without a payment being made to the participant,
such shares shall again be available for distribution in connection with future
awards under the Plan.

         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock or Deferred Stock awards granted under the
Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Option.

                                       10
<PAGE>   6

SECTION 4.  Eligibility.

         Officers, other key employees of the Company or its Subsidiaries,
Non-Employee Directors and consultants and other persons having a contractual
relationship with the Company or its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its Subsidiaries are eligible to be granted Stock Options, Stock
Appreciation Rights, Restricted Stock or Deferred Stock awards under the Plan.
The optionees and participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible, and
the Committee shall determine, in its sole discretion, the number of shares
covered by each award. Notwithstanding the foregoing, no person shall receive
grants of stock options and stock appreciation rights which exceed 1,500,000
shares during any fiscal year of the Company.

SECTION 5.  Stock Options.

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

         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after October 14, 2004.

         The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.

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

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

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

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

                                       11
<PAGE>   7

Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from the date
of grant.

         (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding the foregoing, unless the Stock Option Agreement
provides otherwise, any Stock Option granted under this Plan shall be
exercisable in full, without regard to any installment exercise provisions, for
a period specified by the Company, but not to exceed sixty (60) days, prior to
the occurrence of any of the following events: (i) dissolution or liquidation of
the Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 75% or more of the outstanding Stock of the Company.

         (d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of Stock
already owned by the optionee (which in the case of Stock acquired upon exercise
of an option have been owned for more than six months on the date of surrender)
or, in the case of the exercise of a Non-Qualified Stock Option, Restricted
Stock or Deferred Stock subject to an award hereunder (based, in each case, on
the Fair Market Value of the Stock on the date the option is exercised, as
determined by the Committee), provided, however, that in the event payment is
made in the form of shares of Restricted Stock or a Deferred Stock award, the
optionee will receive a portion of the option shares in the form of, and in an
amount equal to, the Restricted Stock or Deferred Stock award tendered as
payment by the optionee. No shares of Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the rights to dividends
and other rights of a shareholder with respect to shares subject to the option
when the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
paragraph (a) of Section 12.

         (e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.

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

         (g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after one year (or such shorter period as the
Committee shall specify at grant) from the date of

                                       12
<PAGE>   8

such termination of employment or the expiration of the stated term of the
option, whichever period is the shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, the option will thereafter be treated as a Non-Qualified Stock
Option.

         (h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three months (or such longer period as the Committee shall
specify at Retirement)from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is the shorter. In
the event of termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.

         (i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that the option may be exercised to the
extent it was exercisable at such termination for the lesser of three months (or
such shorter period as the Committee shall specify at grant) or the balance of
the option's term, provided, however, that if the optionee's employment is
terminated for Cause, all rights under the Stock Option shall terminate and
expire upon such termination.

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

         (k) Non-Employee Directors. Each Non-Employee Director who is
re-elected as a director of the Company at any Annual Meeting of Shareholders of
the Company shall, as of the date of such election, be automatically granted a
Stock Option to purchase 4,000 shares of stock at the option price per share
equal to 100% of the Fair Market Value of a share of stock on such date. In
addition, each Non-Employee Director who is not affiliated with a Major
Shareholder and who is (A) a director as of the date this Section 5(k) is
approved by the shareholders of the Company; or (B) is elected as a director for
the first time by the shareholders or the directors, shall, as of the date of
such shareholder approval or election, be automatically granted a stock option
to purchase 25,000 shares of stock at an option price per share equal to 100% of
the fair market value of a share of stock on such date. In the case of a special
or Annual Meeting, the action of the shareholders in electing a Non-Employee
Director shall constitute the granting of the Stock Option to each such
director; and the date the shareholders or directors take such action shall be
the date of grant of the Stock Option. All such Stock Options shall be
designated Non-Qualified Stock Options, and shall be subject to the same terms
and provisions as are in effect with respect to the granting of Stock Options to
officers and employees of the Company. Notwithstanding the foregoing,
Non-Employee Directors who hold Stock Options as of the date that Section 5(k)
is approved by the shareholders of the Company shall be entitled to participate
under the provisions of this Section 5(k) only if they irrevocably cancel all
outstanding Stock Options, and all rights associated

                                       13
<PAGE>   9

therewith, then held by such Non-Employee Director. With respect to those
Non-Employee Directors who cancel such outstanding Stock Options, solely with
respect to the Annual Meeting of Shareholders of the Company held to approve
this Section 5(k), and in lieu of the automatic grant with respect to such
meeting as provided above, such Non-Employee Director shall be automatically
granted a Stock Option to purchase 25,000 shares of common stock on the first
business day which is six months and one day after the date such Non-Employee
Director irrevocably cancels all outstanding Stock Options, and all rights
associated therewith, then held by him, at the option price per share equal to
100% of the Fair Market Value of a share of stock on such date. For purposes of
this Section 5(k), a Major Shareholder shall mean a shareholder who, together
with its affiliates and associates, (i) beneficially owns 10% or more of the
outstanding shares of the Company; or (ii) who has the right to designate a
director to the Board of Directors of the Company.

SECTION 6.  Stock Appreciation Rights.

         (a) Grant and Exercise. Except as set forth in paragraph (k) of Section
5, Stock Appreciation Rights may be granted in conjunction with all or part of
any Stock Option granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of
such Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of the option.

         A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.

         A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in paragraph (b) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.

         (b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:

                  (i) Stock Appreciation Rights shall be exercisable only at
         such time or times and to the extent that the Stock Options to which
         they relate shall be exercisable in accordance with the provisions of
         Section 5 and this Section 6 of the Plan.

                  (ii) Upon the exercise of a Stock Appreciation Right, an
         optionee shall be entitled to receive up to, but not more than, an
         amount in cash or shares of Stock equal in value to the excess of the
         Fair Market Value of one share of Stock over the option price per share
         specified in the related option multiplied by the number of shares in
         respect of which the Stock Appreciation Right shall have been
         exercised, with the Committee having the right to determine the form of
         payment.

                  (iii) Stock Appreciation Rights shall be transferable only
         when and to the extent that the underlying Stock Option would be
         transferable under Section 5 of the Plan.

                  (iv) Upon the exercise of a Stock Appreciation Right, the
         Stock Option or part thereof to which such Stock Appreciation Right is
         related shall be deemed to have been exercised for the purpose of the
         limitation set forth in Section 3 of the Plan on the number of shares
         of Stock to be issued under the Plan, but only to the extent of the
         number of shares issued or issuable under the Stock Appreciation Right
         at the time of exercise based on the value of the Stock Appreciation
         Right at such time.

                                       14
<PAGE>   10

                  (v) A Stock Appreciation Right granted in connection with an
         Incentive Stock Option may be exercised only if and when the market
         price of the Stock subject to the Incentive Stock Option exceeds the
         exercise price of such Option.

SECTION 7.  Restricted Stock.

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

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

                  (i) Each participant shall be issued a stock certificate in
         respect of shares of Restricted Stock awarded under the Plan. Such
         certificate shall be registered in the name of the participant, and
         shall bear an appropriate legend referring to the terms, conditions,
         and restrictions applicable to such award, substantially in the
         following form:

                  "The transferability of this certificate and the shares of
                  stock represented hereby are subject to the terms and
                  conditions (including forfeiture) of the Sheldahl, Inc. 1994
                  Stock Plan and an Agreement entered into between the
                  registered owner and Sheldahl, Inc. Copies of such Plan and
                  Agreement are on file in the offices of Sheldahl, Inc., 1150
                  Sheldahl Road, P. O. Box 170, Northfield, MN 55057."

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

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

                  (i) Subject to the provisions of this Plan and the award
         agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the participant shall
         not be permitted to sell, transfer, pledge or assign shares of
         Restricted Stock awarded under the Plan. In no event shall the
         Restriction Period be less than one (1) year. Within these limits, the
         Committee may provide for the lapse of such restrictions in
         installments where deemed appropriate.

                  (ii) Except as provided in paragraph (c)(i) of this Section 7,
         the participant shall have, with respect to the shares of Restricted
         Stock, all of the rights of a shareholder of the Company, including the
         right to vote the shares and the right to receive any cash dividends.
         The Committee, in its sole discretion, may permit or require the
         payment of cash dividends to be deferred and, if the Committee so
         determines, reinvested in additional shares of Restricted Stock (to the
         extent shares are available under Section 3). Certificates for shares
         of unrestricted Stock shall be

                                       15
<PAGE>   11

         delivered to the grantee promptly after, and only after, the period of
         forfeiture shall have expired without forfeiture in respect of such
         shares of Restricted Stock.

                  (iii) Subject to the provisions of the award agreement and
         paragraph (c)(iv) of this Section 7, upon termination of employment for
         any reason during the Restriction Period, all shares still subject to
         restriction shall be forfeited by the participant.

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

                  (v) Notwithstanding the foregoing, all restrictions with
         respect to any participant's shares of Restricted Stock shall lapse, on
         the date determined by the Committee, prior to, but in no event more
         than sixty (60) days prior to, the occurrence of any of the following
         events: (i) dissolution or liquidation of the Company, other than in
         conjunction with a bankruptcy of the Company or any similar occurrence,
         (ii) any merger, consolidation, acquisition, separation,
         reorganization, or similar occurrence, where the Company will not be
         the surviving entity or (iii) the transfer of substantially all of the
         assets of the Company or 75% or more of the outstanding Stock of the
         Company.

SECTION 8.  Deferred Stock Awards.

         (a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of Shares of
Deferred Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the conditions
under which, receipt of the Stock will be deferred, and the terms and conditions
of the award in addition to those contained in paragraph (b) of this Section 8.
The Committee may also condition the grant of Deferred Stock upon the attainment
of specified performance goals. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.

         (b)      Terms and Conditions.

                  (i) Subject to the provisions of this Plan and the award
         agreement, Deferred Stock awards may not be sold, assigned,
         transferred, pledged or otherwise encumbered during the Deferral
         Period. In no event shall the Deferral Period be less than one (1)
         year. At the expiration of the Deferral Period (or Elective Deferral
         Period, where applicable), share certificates shall be delivered to the
         participant, or his legal representative, in a number equal to the
         shares covered by the Deferred Stock award.

                  (ii) Amounts equal to any dividends declared during the
         Deferral Period with respect to the number of shares covered by a
         Deferred Stock award will be paid to the participant currently or
         deferred and deemed to be reinvested in additional Deferred Stock or
         otherwise reinvested, all as determined at the time of the award by the
         Committee, in its sole discretion.

                  (iii) Subject to the provisions of the award agreement and
         paragraph (b)(iv) of this Section 8, upon termination of employment for
         any reason during the Deferral Period for a given award, the Deferred
         Stock in question shall be forfeited by the participant.

                                       16
<PAGE>   12

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

                  (v) A participant may elect to further defer receipt of the
         award for a specified period or until a specified event (the "Elective
         Deferral Period"), subject in each case to the Committee's approval and
         to such terms as are determined by the Committee, all in its sole
         discretion. Subject to any exceptions adopted by the Committee, such
         election must generally be made prior to completion of one half of the
         Deferral Period for a Deferred Stock award (or for an installment of
         such an award).

                  (vi) Each award shall be confirmed by, and subject to the
         terms of, a Deferred Stock agreement executed by the Company and the
         participant.

SECTION 9.  Transfer, Leave of Absence, etc.

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

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

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

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

SECTION 10.  Amendments and Termination.

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

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

                                       17
<PAGE>   13

SECTION 11. Unfunded Status of Plan.

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

SECTION 12.  General Provisions.

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

         All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.

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

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

         (d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings and in the event shares are withheld, the amount withheld shall not
exceed the minimum required Federal, state and FICA withholding amount.

                                       18

<PAGE>   14

SECTION 13.  Effective Date of Plan.

         The Plan shall be effective on October 14, 1994 (the date of approval
by the Board of Directors), subject to approval by a vote of the holders of a
majority of the Stock present and entitled to vote at the Annual Meeting of the
Company's Shareholders on January 11, 1995 to approve (i) the Plan and (ii) an
amendment to the Company's Articles of Incorporation to increase the authorized
shares. The Plan shall expire (unless terminated earlier) as of October 14,
2004. Awards may be granted under the Plan prior to such Shareholder approval,
provided such awards are made subject to Shareholder approval. Shareholder
approval of the Plan was obtained on January 11, 1995.

         The Plan was amended by the resolutions adopted by the Board of
Directors on August 18, 1996 and October 31, 1996. The Shareholders ratified the
amendments on January 8, 1997. The Plan was amended by the resolution adopted by
the Board of Directors on February 28, 2001, and ratified by the Shareholders on
June 26, 2001.

                                       19

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