BMC INDUSTRIES INC/MN/
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<TYPE>EX-10.44
<SEQUENCE>2
<FILENAME>hepper-agr.htm
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<title>Document</title>
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<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p align="center">EMPLOYMENT AGREEMENT</p>

<p align="justify">&nbsp;</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; THIS
EMPLOYMENT AGREEMENT (this &quot;Agreement&quot;) is made this 14th day of May,
2002, by and between BMC Industries, Inc, a Minnesota corporation (the &quot;Company&quot;),
and Douglas Hepper (&quot;Executive&quot;).</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS,
the Company wishes to secure Executive's services as Chief Executive Officer,
under the terms and conditions hereof; and&nbsp;&nbsp;</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS,
Executive wishes to provide such services to the Company;</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW,
THEREFORE, in consideration of the premises and of the mutual covenants and
undertakings stated herein, Executive and the Company hereby agree as follows:</p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.&nbsp;&nbsp;&nbsp; <u>Employment</u></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subject
to all terms and conditions hereof, the Company shall employ Executive, and
Executive shall serve the Company as an employee, until Executive's employment
terminates under <u>Section 4</u> hereof.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.&nbsp;&nbsp;&nbsp; <u>Duties
and Powers of Executive</u></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subject to all terms and conditions
hereof, the Company shall employ Executive as, and Executive shall serve as,
Chairman, President and Chief Executive Officer of the Company.&nbsp; Executive shall have all duties customarily
associated with the office of chief executive officer, shall have primary
management responsibility for the Company and its businesses, and shall perform
such other duties consistent with the position of chief executive officer as
may be specified from time to time by the Board of Directors of the Company
(the &quot;Board&quot;), to whom Executive shall report.&nbsp; While Executive is employed by the Company,
Executive shall devote full time to Executive's duties hereunder and shall not
accept other employment or engage in other material business activity, except
as may be approved in writing by the Board.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.&nbsp;&nbsp;&nbsp; <u>Compensation</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;&nbsp;&nbsp; While Executive is employed by the
Company hereunder, the Company shall pay to Executive a base salary at a rate
determined by the Board from time to time (but not less than&nbsp; $400,000 per year), payable in accordance
with the Company's standard payroll practices as in effect from time to time.
If, during any period while Executive is employed hereunder, the Company
provides a health-care plan for its management but Executive does not receive
coverage thereunder, then the Company shall pay to Executive, as additional
cash compensation for such period, such amount as the Company would have paid
as the Company's share of the coverage cost had Executive been covered under
such plan.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp; While Executive is employed by the
Company hereunder, Executive shall participate in the Company's management
incentive plan, as in effect from time to time, and subject to such financial-performance
goals and other terms and conditions as the Board may establish from time to
time.&nbsp; For each fiscal year of the
Company throughout which Executive is employed hereunder, his bonus opportunity
target under such plan shall be 75% of his base compensation during such fiscal
year, and his bonus opportunity maximum under such Plan shall be 112.5% of such
base compensation.&nbsp; For any fiscal year
during which Executive is employed hereunder for less than all of such fiscal
year, such target and such maximum shall be prorated to reflect that part of
such fiscal year during which Executive was so employed. (For the Company's
fiscal year ending in 2002, the amount of Executive's bonus shall not be less
than his bonus opportunity target, prorated to reflect that portion of such
fiscal year while he is employed hereunder.)</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp; Upon
commencement of Executive's employment hereunder, the Company shall award to
Executive, under the Company's stock option plan for executives then in effect,
non-qualified options to purchase&nbsp;
300,000 shares of stock of the Company, having</p>

<blockquote>
  <blockquote>
    <blockquote>

<p>(i)&nbsp;&nbsp;&nbsp; a per-share option-exercise price equal to the
average of the per-share high and low trading prices of such stock on the New
York Stock Exchange on the first business day of employment, and </p>

<p>(ii)&nbsp;&nbsp;&nbsp; a vesting schedule such that 20% of such
options shall vest on each of the first five anniversaries of&nbsp; such first business day.&nbsp; </p>

    </blockquote>
  </blockquote>
</blockquote>

<p>Such award shall be subject to Executive's executing the Company's standard
form of option agreement, a copy of which is attached as Exhibit A.&nbsp; If
Executive remains employed hereunder for a period of at least three years, then,
in the event of a termination of employment after the end of such three-year
period other than &quot;For Cause&quot; (as defined below), the Company shall cause all
such options to be vested and to be exercisable until the first anniversary of
the Termination Date (as defined below).&nbsp; </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp; While
Executive is employed by the Company hereunder, the Company shall provide to
Executive participation in the Company's </p>

<blockquote>
  <blockquote>
    <blockquote>

<p>(i)&nbsp;&nbsp;&nbsp; vacation plan (at a vacation-accrual rate of
four weeks per year);</p>

<p>(ii)&nbsp;&nbsp;&nbsp; flexible-account plan (providing 10% of base
compensation to reimburse for club memberships and automobile lease);</p>

<p>(iii)&nbsp;&nbsp;&nbsp; savings and profit sharing plan; and</p>

<p>(iv)&nbsp;&nbsp;&nbsp; other insurance, pension and similar
fringe-benefit plans as may be provided from time to time by the Company to its
other senior executives, </p>

    </blockquote>
  </blockquote>
</blockquote>

<p>in each case as such plan may be in
effect from time to time. The Company shall also reimburse Executive for the
admission fee (not exceeding $50,000) at a country club. For each of the first
36 months while Executive is employed hereunder, 1/36<sup>th</sup> of the total
so reimbursed by the Company shall be applied to the flexible-account plan
referred to in clause (ii) above and shall reduce the amount otherwise
available to Executive under such plan.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.&nbsp;&nbsp;&nbsp; <u>
Termination</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Executive's
employment by the Company hereunder shall terminate immediately upon:</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp; receipt by the Company of Executive's
resignation (whether written, oral or in other form);</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp; receipt by Executive of notice from the Company
of termination of his employment; or</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp; Executive's death or Incapacity (as defined
below),</p>

<p>and the date on which termination occurs
shall be the &quot;Termination Date.&quot;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.&nbsp;&nbsp;&nbsp;&nbsp; <u>Payments
Upon Termination</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If Executive's employment hereunder
ends by reason of Involuntary Termination (as defined below), then </p>

<blockquote>
  <blockquote>

    <blockquote>

<p>(i)&nbsp;&nbsp;&nbsp; if
the Termination Date is within 90 days after a Change in Control (as defined
below), the Company shall continue to pay Executive's base salary, at the rate
then in effect, until the third anniversary of the Termination Date; or </p>

<p>(ii)&nbsp;&nbsp;&nbsp; if the
Termination Date is not within 90 days after a Change in Control, then the
Company shall continue to pay Executive's base salary at the rate then in
effect until the first anniversary of the Termination Date, and shall also pay
to Executive for each of the 12 months immediately following the Termination
Date, 1/12<sup>th</sup>of Executive's bonus opportunity target for the fiscal
year in which the Termination Date falls.</p>

    </blockquote>
  </blockquote>
</blockquote>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp; If Executive's employment hereunder
ends by reason other than Involuntary Termination, then the Company shall pay
Executive's base salary through the Termination Date.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;&nbsp;&nbsp; In the event of termination of
Executive's employment, the sole obligation of the Company shall be its
obligation to make the payments called for by <u>Section 5(a)</u> or <u>Section
5(b)</u> above and the Company shall have no other obligation to Executive,
except as otherwise provided by law.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp; For any period following the
Termination Date, if Executive renders services during such period (whether as
an employee, consultant or otherwise), and receives at any time remuneration
for such services, then the amount otherwise payable by the Company for that
period (if any) shall be reduced by the amount of such remuneration.&nbsp; Executive shall at all times while entitled
to any payment hereunder (and as a precondition to such payment) provide to the
Company in writing the name and business address of each person and entity for
whom Executive renders services, and a summary description of the principal
business of such person or entity and the title, position, principle duties,
address and telephone number of Executive.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.&nbsp;&nbsp;&nbsp; <u>Certain Definitions</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp; A
termination of employment by the Company shall be &quot;For Cause&quot; if (and
only if) such termination is for (i)&nbsp;Executive's dishonesty or willful
misconduct related to the Company, (ii)&nbsp;Executive's neglect of his or her
duties, if the Company has given to Executive notice specifying the act or
omission constituting such neglect and Executive has repeated such act or
omission following receipt of such notice or (iii)&nbsp;conviction of a felony
or conviction of any crime involving moral turpitude.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp; &quot;Involuntary
Termination&quot; shall mean (i)&nbsp;any termination by the Company that is
not &quot;For Cause&quot; and (ii)&nbsp;any resignation by Executive if such
resignation occurs within 60 days following the occurrence of any Change in
Employment Terms (as hereinafter defined).</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;&nbsp;&nbsp; &quot;Change
in Employment Terms&quot; shall mean (i)&nbsp;demotion of Executive or any
material reduction in his authority or assignment to him of material duties
that are substantially inconsistent with&nbsp;
his position and title immediately prior to such assignment;
(ii)&nbsp;any reduction of Executive's base salary; (iii)&nbsp;any reduction of
the target amount for Executive's position under the management incentive plan;
(iv)&nbsp;any requirement that Executive relocate; (v)&nbsp;any substantial
reduction in the benefits and perquisites provided to Executive; and (vi)&nbsp;any
other material adverse change in the terms and conditions of Executive's
employment (but no amendment to this Agreement in accordance with its terms
shall be deemed a Change in Employment Terms); <u>provided</u>, <u>however</u>,
that none of the foregoing shall constitute a Change in Employment Terms unless
Executive objects thereto by giving notice to the Board within 30 days after
Executive becomes aware of such assignment, reduction, requirement or other
change and the Company fails to correct the same within 30 days following
receipt of such notice, in which case a Change in Employment Terms will be
deemed to have occurred on the 31st day following the Board's receipt of such
notice. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp; &quot;Change
in Control&quot; means</p>

<blockquote>
  <blockquote>
    <blockquote>

<p>(i)&nbsp;&nbsp;&nbsp; a
majority of the directors of the Company are Persons other than Persons
(A)&nbsp;for whose election proxies have been solicited by the Board or
(B)&nbsp;who are then serving as directors appointed by the Board to fill
vacancies on the Board caused by death or resignation (but not by removal) or
to fill newly created directorships;</p>

<p>(ii)&nbsp;&nbsp;&nbsp; beneficial ownership (as determined by Rule 13d-3
under the Securities Exchange Act of 1934, as amended (or any successor
thereto)) of more than 30% of all outstanding voting stock of the Company is
acquired in one or more transactions by any Person or group of Persons acting in
concert (other than the Company); or</p>

<p>(iii)&nbsp;&nbsp;&nbsp; the
shareholders of the Company approve a definitive agreement or plan to</p>

      <blockquote>

<p>(A)&nbsp;&nbsp;&nbsp; merge or consolidate the Company with or into another
corporation (other than (1)&nbsp;a merger or consolidation with a corporation
controlling the Company or controlled by the Company within the meaning of Code
Section 368(c) or (2)&nbsp;a merger in which the Company is the surviving corporation
and either (x) no outstanding voting stock of the Company (other than fractional
shares) held by stockholders immediately prior to the merger is converted into
cash, securities or other property or (y) all holders of outstanding voting
stock of the Company (other than fractional shares) immediately prior to the
merger have substantially the same proportionate ownership of the voting stock
of the Company or its parent corporation immediately after the merger),</p>

<p>(B)&nbsp;&nbsp;&nbsp; exchange, pursuant to a statutory exchange of shares of
voting stock of the Company held by shareholders of the Company immediately
prior to the exchange, shares of one or more classes or series of voting stock
of the Company for shares of another corporation,</p>

<p>(C)&nbsp;&nbsp;&nbsp; sell or
otherwise dispose of all or substantially all of the assets of the Company (in
one transaction or a series of transactions) or </p>

<p>(D)&nbsp;&nbsp;&nbsp; liquidate
or dissolve the Company.</p>

      </blockquote>
    </blockquote>

  </blockquote>
</blockquote>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (e)&nbsp;&nbsp;&nbsp; &quot;Code&quot;
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor statute.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (f)&nbsp;&nbsp;&nbsp; &quot;Person&quot;
means any individual, corporation, company, partnership, association, trust or
other entity of any kind.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (g)&nbsp;&nbsp;&nbsp; &quot;Incapacity&quot; means the
inability of Executive to perform Executive's duties hereunder by reason of
illness or other physical or mental impairment or condition, if such inability
continues for 60 days or more.&nbsp; </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.&nbsp;&nbsp;&nbsp; <u>Certain
Covenants of Executive</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp; As
used in this <u>Section 7</u>, &quot;Company&quot; shall include the Company
and each corporation, partnership and other entity which controls the Company,
is controlled by the Company or is under common control with the Company (in
each case &quot;control&quot; meaning the direct or indirect ownership of 50%
or more of all outstanding equity interests).</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp; Executive
hereby agrees that, while Executive is employed by the Company and until the
first anniversary of the Termination Date, Executive will not, directly or
indirectly </p>

<blockquote>
  <blockquote>
    <blockquote>

<p>(i)&nbsp;&nbsp;&nbsp; own, operate, invest in, lend money to, be
employed by, consult with, render services to, act as agent, officer or
director for, or acquire or hold any interest in (A) any business that competes
with any business owned or operated by the Company; or (B) any Person which
owns, operates or has an interest in any such competing business (except that
nothing herein shall prohibit Executive from owning not more than 1.0% of the
outstanding shares of any class of stock of a corporation if such class of
stock is regularly traded on a recognized national securities exchange);</p>

<p>(ii)&nbsp;&nbsp;&nbsp; employ or attempt to employ any director,
officer or employee of the Company, or otherwise interfere with or disrupt any
employment relationship (contractual or other) of the Company;</p>

<p>(iii)&nbsp;&nbsp;&nbsp; solicit, request, advise or induce any present
or potential customer, supplier or other business contact of the Company to
cancel, curtail or otherwise change its relationship with the Company; or</p>

<p>(iv)&nbsp;&nbsp;&nbsp; publicly criticize or disparage in any manner
or by any means the Company, or any aspect of its management, policies,
operations, products, services, practices or personnel.</p>

    </blockquote>
  </blockquote>
</blockquote>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp; Executive
hereby acknowledges and agrees that all non-public information and data of the
Company, including without limitation that related to product and service
formulation, customers, pricing, sales and financial results are of substantial
value to the Company, provide it with a substantial competitive advantage in
its businesses and are and have been maintained in the strictest confidence as
trade secrets.&nbsp; Except as otherwise
approved by the Company in writing, Executive shall not at any time divulge,
furnish or make accessible to anyone (other than the Company and its directors
and officers) any such information or data.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp; Executive
hereby specifically acknowledges and agrees that this <u>Section 7</u> and each
provision hereof are reasonable and necessary to ensure that the Company
receives the expected benefits of this Agreement and that violation of this <u>Section
7</u> will harm the Company to such an extent that monetary damages alone would
be an inadequate remedy.&nbsp; Therefore, in
the event of any violation by Executive of any provision of this <u>Section 7</u>,
the Company shall be entitled to an injunction (in addition to all other
remedies it may have) restraining Executive from committing or continuing such
violation.&nbsp; If any provision or
application of this <u>Section 7</u> is held unlawful or unenforceable in any
respect, this <u>Section 7</u> shall be revised or applied in a manner that
renders it lawful and enforceable to the fullest extent possible.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.&nbsp;&nbsp;&nbsp; <u>No
Violation of Other Agreements</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Executive hereby represents and
agrees that neither (a) Executive's entering into this Agreement nor (b)
Executive's carrying out the provisions of this Agreement, will violate any
other agreement (oral, written or other) to which Executive is a party or by
which Executive is bound.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.&nbsp;&nbsp;&nbsp; <u>Successors
and Assigns</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement is binding on
Executive and on the Company and its successors and assigns.&nbsp; The rights and obligations of the Company
under this Agreement may be assigned to a successor.&nbsp; No rights or obligations of Executive hereunder may be assigned
by Executive to any other person or entity.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.&nbsp;&nbsp;&nbsp; <u>Separate
Representation</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Executive hereby acknowledges that
Executive has sought and received independent advice from counsel of Executive's
own selection in connection with this Agreement and has not relied to any extent
on any officer, director or shareholder of, or counsel to, the Company in
deciding to enter into this Agreement.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp; <u>
Governing Law</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement shall be construed
under and governed by the laws of the State of Minnesota.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp; <u>Severability</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each section and provision of this
Agreement shall be considered severable and any invalidity of any provision
shall not render invalid or impair to any extent any other section or provision
hereof.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13.&nbsp;&nbsp;&nbsp;<u>Withholding
of Taxes</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All payments to Executive hereunder
are subject to withholding of income and employment taxes and all other amounts
required by law.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.&nbsp;&nbsp;&nbsp; Reduction
Regarding Section 280G.&nbsp; Reference is
hereby made to Section 280G of the Internal Revenue Code of 1986, as amended,
and any successor provision having substantially similar effect (&quot;Section
280G&quot;).&nbsp; If, as a result of the
application of Section&nbsp;280G to any payment hereunder (or to any such
payment when combined with any other payment, benefit, stock option, stock or
unit vesting or other transaction) that would constitute &quot;parachute
payments&quot; under Section 280G,</p>

<blockquote>
  <blockquote>

<p>(i)&nbsp;&nbsp;&nbsp; Executive
would receive after-tax benefits that are less than those he would have
received if Section 280G did not apply and</p>

<p>(ii)&nbsp;&nbsp;&nbsp; reduction
of payments hereunder would increase such after-tax benefits received by
Executive,&nbsp; </p>

  </blockquote>
</blockquote>

<p>then
payments hereunder shall be reduced by such amount that will restore to the
maximum extent possible such after-tax benefits received by Executive.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 15.&nbsp;&nbsp;&nbsp;
<u>Miscellaneous</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each notice hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed by registered or certified mail, return receipt requested, postage
prepaid, to the party to receive the same, at the address set forth with the
signature of such party hereto or at such other address as may have been
furnished to the sender by notice hereunder.&nbsp;
Each notice shall be deemed given on the date on which received.&nbsp; This Agreement contains the entire
understanding of the parties hereto, and no provision hereof may be altered,
amended, modified, waived, or discharged in any way whatsoever except by
written agreement executed by both parties.&nbsp;
No delay or failure of either party to insist, in any one or more
instances, upon performance of any of the terms and conditions of this
Agreement or to exercise any rights or remedies hereunder shall constitute a
waiver or a relinquishment of such rights or remedies or any other rights or
remedies hereunder.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed on the date and year
first above written.</p>

<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%">
  <tr>
    <td>DOUGLAS HEPPER&nbsp;</td>
    <td>&nbsp;BMC INDUSTRIES, INC.</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>c/o BMC INDUSTRIES, INC.&nbsp;</td>
    <td>One Meridian Crossings</td>
  </tr>
  <tr>
    <td>One Meridian Crossings</td>
    <td>Suite 850</td>
  </tr>
  <tr>
    <td>Suite 850</td>
    <td>Minneapolis, Minnesota 55423</td>
  </tr>
  <tr>
    <td>Minneapolis, Minnesota 55423</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><u>/s/Douglas C. Hepper&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </u></td>
    <td>By:&nbsp;
<u>/s/Paul B. Burke&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </u>&nbsp;&nbsp;&nbsp;&nbsp; </td>
  </tr>
  <tr>
    <td>Douglas Hepper</td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    </td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</td>
    <td>Title:&nbsp; Chairman and Chief Executive Officer</td>
  </tr>
</table>

<p>&nbsp;</p>



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