CARDIOPULMONARY CORP.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
The purpose of this Stock Option Plan for Non-Employee Directors (the
"PLAN") of Cardiopulmonary Corp. (the "CORPORATION") is to strengthen the
Corporation's ability to attract and retain the services of knowledgeable and
experienced persons who, through their efforts and expertise, can make a
significant contribution to the success of the Corporation's business by serving
as members of the Corporation's Board of Directors and to provide additional
incentive for such directors to continue to work for the best interests of the
Corporation and its stockholders through ownership of its Common Stock, $.01 par
value (the "COMMON STOCK"). Accordingly, the Corporation will grant to each
non-employee director options to purchase shares of the Corporation's Common
Stock on the terms and conditions hereafter established.
2. STOCK SUBJECT TO PLAN.
The Company may issue and sell a total of 100,000 shares of its Common
Stock pursuant to the Plan. Such shares may be either authorized and unissued or
held by the Company in its treasury. New options may be granted under the Plan
with respect to shares of Common Stock which are covered by the unexercised
portion of an option which has terminated or expired by its terms, by
cancellation or otherwise.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board of Directors of the
Corporation (the "BOARD"). The interpretation and construction by the Board of
any provisions of the Plan or of any other matters related to the Plan shall be
final. The Board may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem advisable. No member of the Board shall be
liable for any action or determination made in good faith with respect to the
Plan.
The Board of Directors may at any time amend, alter, suspend or
terminate the Plan; provided, however, that any such action would not impair any
option to purchase Common Stock theretofore granted under the Plan; and provided
further that without the approval of the Corporation's stockholders, no
amendments or alterations would be made which would (i) increase the number of
shares of Common Stock that may be purchased by each non-employee director under
the Plan (except as permitted by Paragraph 10), (ii) increase the aggregate
number
of shares of Common Stock as to which options may be granted under the Plan
(except as permitted by Paragraph 10), (iii) decrease the option exercise price
(except as permitted by Paragraph 10), or (iv) extend the period during which
outstanding options granted under the Plan may be exercised; and provided
further that Paragraph 5 of the Plan shall not be amended more than once every
six months other than to comply with changes in the Internal Revenue Code of
1986, as amended, or the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
4. ELIGIBILITY.
All non-employee directors of the Corporation shall be eligible to
receive options under the Plan. Receipt of stock options under any other stock
option plan maintained by the Corporation or any subsidiary shall not, for that
reason, preclude a director from receiving options under the Plan.
5. GRANTS.
(i) Each non-employee director shall be issued an option to purchase
10,000 shares of the Corporation's Common Stock (the "INITIAL OPTION") on the
date of the earlier of his initial election or appointment to the Board of
Directors or the approval of this plan by the shareholders of the Corporation
(the "INITIAL GRANT DATE") at the following price for the following term and
otherwise in accordance with the terms of the Plan:
(a) The option exercise price per share of Common Stock shall be
the Fair Market Value (as defined below) of the Common Stock covered by
such Initial Option on the Initial Grant Date.
(b) Except as provided herein, the term of an Initial Option shall
be for a period of ten (10) years from the Initial Grant Date.
(ii) In addition, each non-employee director shall, on the fifth
anniversary and on each successive anniversary of the Initial Grant Date (each
and "ADDITIONAL GRANT DATE"), if he is still a non-employee director on such
date, be granted an option to purchase 2,000 shares of the Corporation's Common
Stock (an "ADDITIONAL OPTION") at the following price for the following term and
otherwise in accordance with the terms of the Plan:
(a) The option exercise price per share of Common Stock shall be
the Fair Market Value (as defined below) of the Common Stock covered by
such Additional Option on the Additional Grant Date.
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(b) Except as provided herein, the term of an Additional Option
shall be for a period of ten (10) years from the Additional Grant Date.
(iii) "FAIR MARKET VALUE" shall mean, for each Grant Date, (A) if the
Common Stock is listed or admitted to trading on the New York Stock Exchange
(the "NYSE") or the American Stock Exchange (the "ASE"), the average of the high
and low sale price of the Common Stock on such date or, if no sale takes place
on such date, the average of the highest closing bid and lowest closing asked
prices of the Common Stock on such exchange, in each case as officially reported
on the NYSE or the ASE, or (B) if no shares of Common Stock are then listed or
admitted to trading on the NYSE or the ASE, the average of the high and low sale
prices of the Common Stock on such date on the NASDAQ National Market System or,
if no shares of Common Stock are then quoted on the NASDAQ National Market
System, the average of the closing bid and highest asked prices of the Common
Stock on such date on NASDAQ or, if no shares of Common Stock are then quoted on
NASDAQ, the average of the highest bid and lowest asked prices of the Common
Stock on such date as reported in the over-the-counter system. If no closing bid
and highest asked prices thereof are then so quoted or published in the
over-the-counter market, "Fair Market Value" shall mean the fair value per share
of Common Stock (assuming for the purposes of this calculation the economic
equivalence of all shares of classes of capital stock), as determined on a fully
diluted basis in good faith by the Board, as of a date which is 15 days
preceding such Grant Date.
6. REGULATORY COMPLIANCE AND LISTING.
The issuance or delivery of any Option may be postponed by the
Corporation for such period as may be required to comply with the Federal
securities laws, any applicable listing requirements of any applicable
securities exchange and any other law or regulation applicable to the issuance
or delivery of such Options, and the Corporation shall not be obligated to issue
or deliver any Options if the issuance or delivery of such options would
constitute a violation of any law or any regulation of any governmental
authority or applicable securities exchange.
7. RESTRICTIONS ON EXERCISABILITY AND SALE.
(i) Except as provided in Section 7(ii) below, and subject to
Section 7(iii) below, (a) each Initial Option granted under the Plan may be
exercisable as to 20% of the total number of shares issuable under such Initial
Option on each of the five successive anniversaries of the Grant Date of such
Initial Option, and (b) each Additional Option granted under the Plan may be
exercisable as to 100% of the total number of shares issuable under such
Additional Option on the first anniversary of the Grant Date of such Additional
Option.
(ii) If any event constituting a "Change in Control of the
Corporation" shall occur, all Options granted under the Plan which are
outstanding at the time a Change of
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Control of the Corporation shall occur shall immediately become exercisable. A
"CHANGE IN CONTROL OF THE CORPORATION" shall be deemed to occur if (i) there
shall be consummated (x) any consolidation or merger of the Corporation in which
the Corporation is not the continuing or surviving corporation or pursuant to
which shares of the Corporation's Common Stock would be converted into cash,
securities or other property, other than a merger of the Corporation in which
the holders of the Corporation's Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Corporation, or (ii) the stockholders
of the Corporation shall approve any plan or proposal for liquidation or
dissolution of the Corporation, or (iii) any person (as such term is used in
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 20% or more of the Corporation's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Corporation, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Corporation's stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of the period.
(iii) Notwithstanding anything herein to the contrary, no Option
granted hereunder may be exercised unless and until the Corporation has closed
an offering of shares of its Common Stock to the public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
8. CESSATION AS DIRECTOR.
In the event that the holder of an Option granted pursuant to the Plan
shall cease to be a director of the Corporation for any reason such holder may
exercise any portion of the Option that is exercisable by him at the time he
ceases to be a director of the Corporation, but only to the extent such Option
is exercisable as of such date, within six months after the date he ceases to be
a director of the Corporation.
9. DEATH.
In the event that a holder of an Option granted pursuant to the Plan
shall die, his estate, personal representative or beneficiary may exercise any
portion of the Option that was exercisable by the deceased Optionee at the time
of his death, but only to the extent such Option is exercisable as of such date,
within twelve months after the date of his death.
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10. STOCK SPLITS, MERGERS, ETC.
In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Common Stock,
(i) the number of options available under the Plan, (ii) the number of shares to
be granted pursuant to Section 5 of this Agreement and (iii) the number and
option exercise price per share of Common Stock which may be purchased under any
outstanding Options, each shall be adjusted automatically to the nearest whole
share (disregarding any fractional shares) to reflect such transaction. In the
case of a merger, consolidation or similar transaction which results in a
replacement of the Corporation's Common Stock and stock of another corporation
but does not constitute Change in Control of the Corporation, the Corporation
will make a reasonable effort, but shall not be required, to replace any
outstanding Options granted under the Plan with comparable options to purchase
the stock of such other corporation, or will provide for immediate maturity of
all outstanding Options, with all Options not being exercised within the time
period specified by the Board of Directors being terminated.
11. TRANSFERABILITY.
Options are not assignable or transferable, except upon the
optionholder's death to a beneficiary designated by the optionee in accordance
with procedures established the Board or, if no designated beneficiary shall
survive the optionholder, pursuant to the optionholder's will or by the laws of
descent and distribution, to the extent set forth in Section 9 and during the
optionholder's lifetime, may be exercised only by him.
12. EXERCISE OF OPTIONS.
An optionholder electing to exercise an Option shall give written
notice to the Corporation of such election and of the number of shares of Common
Stock that he has elected to acquire. An optionholder shall have no rights of a
stockholder with respect to shares of Common Stock covered by his Option until
after the date of issuance of a stock certificate to him upon partial or
complete exercise of his option.
13. PAYMENT.
The Option exercise price shall be payable in cash, check or in shares
of Common Stock upon the exercise of the Option. If the shares of Common Stock
are tendered as payment of the Option exercise price, the value of such shares
shall be the Fair Market Value as of the date of exercise. If such tender would
result in the issuance of fractional shares of Common Stock, the Corporation
shall instead return the difference in cash or by check to the employee.
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14. OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation on the director to
exercise such option.
15. CONTINUANCE AS DIRECTOR.
Nothing in the Plan shall be deemed to create any obligation on the
part of the Board to nominate any director for reelection by the Corporation's
stockholders.
16. TERM OF PLAN.
The Plan shall be effective as of the date on which it is adopted by
the Board, subject to the approval of the stockholders of the Company within one
year from the date of adoption by the Board. The Plan will terminate on the date
ten years after the date of adoption by the Board, unless sooner terminated by
the Board. The rights of optionees under options outstanding at the time of the
termination of the Plan shall not be affected solely by reason of the
termination and shall continue in accordance with the terms of the option (as
then in effect or thereafter amended).
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