Exhibit 10.2
BIO-VASCULAR, INC.
1995 STOCK INCENTIVE PLAN
(As Amended Effective March 19, 1997)
Section 1. Purpose of Plan. The purpose of the Bio-Vascular, Inc. 1995
Stock Incentive Plan (the "Plan") is to advance the interests of Bio-Vascular,
Inc. (the "Company") and its shareholders by enabling the Company and its
Subsidiaries to attract and retain persons of ability to perform services for
the Company and its Subsidiaries by providing an incentive to such individuals
through equity participation in the Company and by rewarding such individuals
who contribute to the achievement by the Company of its economic objectives. In
connection with the Company's distribution of all of the outstanding shares of
the common stock of Vital Images, Inc. ("Vital Images") (the "Spin-Off"),
certain amendments to the Plan have been effected in order to allow awards under
the Plan made to Vital Images employees to continue following the effective date
of the Spin-Off.
Section 2. Definitions. The following terms will have the meanings set
forth below, unless the context clearly otherwise requires:
(a) "Board" means the Board of Directors of the Company.
(b) "Broker Exercise Notice" means a written notice pursuant to which a
Participant, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
(c) "Change in Control" means an event described in Section 12(a) of the
Plan.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the group of individuals administering the Plan, as
provided in Section 3 of the Plan.
(f) "Common Stock" means the common stock of the Company, par value $.01
per share, or the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with Section 4(c) of the
Plan.
(g) "Disability" means the disability of the Participant such as would
entitle the Participant to receive disability income benefits pursuant to the
long-term disability plan of the Employer or Subsidiary of the Employer then
covering the Participant or, if no such plan exists or is applicable to the
Participant, the permanent and total disability of the Participant within the
meaning of Section 22(e)(3) of the Code.
(h) "Eligible Recipients" means all employees, non-employee directors,
consultants and independent contractors of the Company or any Subsidiary of the
Company.
(i) "Employer" means the Company if the Participant renders employment or
other services to the Company or any Subsidiary of the Company and means Vital
Images if the Participant renders employment or other services to Vital Images
or any Subsidiary of Vital Images.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means, with respect to the Common Stock, the
following:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the Nasdaq
National Market, the closing price of the Common Stock on such exchange or
reported by the Nasdaq National Market as of such date (or, if no shares
were traded on such day, as of the next preceding day on which there was
such a trade).
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the Nasdaq National Market, and prices
therefor in the over-the-counter market are reported by the Nasdaq SmallCap
Market or the National Quotation Bureau, Inc. (or any comparable reporting
service), the closing price as of such date, as so reported by the Nasdaq
SmallCap Market, or, if not so reported thereon, as reported by the
National Quotation Bureau, Inc. (or such comparable reporting service).
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the Nasdaq National Market, and such bid
and asked prices are not so reported, such price as the Committee
determines in good faith in the exercise of its reasonable discretion. The
Committee shall not be required to obtain an appraisal within six months of
the adoption of the Plan. The Committee's determination as to the current
value of the Common Stock shall be final, conclusive and binding for all
purposes and on all persons, including, without limitation, the Company,
the shareholders of the Company, the Participants and their respective
successors-in-interest. No member of the Board of the Committee shall be
liable for any determination regarding current value of the Common Stock
that is made in good faith.
(l) "Incentive Award" means an Option, Restricted Stock Award, Performance
Unit or Stock Bonus granted to an Eligible Recipient pursuant to the Plan.
(m) "Incentive Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
(n) "Non-Statutory Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that does not
qualify as an Incentive Stock Option.
(o) "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
(p) "Participant" means an Eligible Recipient who receives one or more
Incentive Awards under the Plan.
(q) "Performance Unit" means a right granted to an Eligible Recipient
pursuant to Section 8 of the Plan to receive a payment from the Company, in the
form of stock, cash or a combination of both, upon the achievement of
established performance or other goals.
(r) "Previously Acquired Shares" means shares of Common Stock that are
already owned by the Participant or, with respect to any Incentive Award, that
are to be issued upon the grant, exercise or vesting of such Incentive Award.
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(s) "Restricted Stock Award" means an award of Common Stock granted to an
Eligible Recipient pursuant to Section 7 of the Plan that is subject to the
restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 7.
(t) "Retirement" means termination of employment or service pursuant to
and in accordance with the regular (or, if approved by the Board of Directors of
the Employer for purposes of the Plan, early) retirement/pension plan or
practice of the Employer or Subsidiary of the Employer then covering the
Participant, provided that if the Participant is not covered by any such plan or
practice, the Participant will be deemed to be covered by the Employer's plan or
practice, for purposes of this determination.
(u) "Securities Act" means the Securities Act of 1933, as amended.
(v) "Stock Bonus" means an award of Common Stock granted to an Eligible
Recipient pursuant to Section 9 of the Plan.
(w) "Subsidiary" means (i) when used in reference to the Company, any
entity that is directly or indirectly controlled by the Company or any entity in
which the Company has a significant equity interest, as determined by the
Committee or (ii) when used in reference to Vital Images, any entity that is
directly or indirectly controlled by Vital Images or any entity in which Vital
Images has a significant equity interest, as determined by the Vital Images
Committee.
(x) "Tax Date" means the date any withholding tax obligation arises under
the Code for a Participant with respect to an Incentive Award.
(y) "Vital Images Committee" means the group of individuals administering
the Vital Images, Inc. 1995 Stock Incentive Adjustment Plan.
Section 3. Plan Administration.
(a) The Committee. So long as the Company has a class of its equity
securities registered under Section 12 of the Exchange Act, the Plan will be
administered by a committee (the "Committee") consisting solely of not less than
two members of the Board who are "disinterested persons" within the meaning of
Rule 16b-3 under the Exchange Act. To the extent consistent with corporate law,
the Committee may delegate to any officers of the Company the duties, power and
authority of the Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however, that only the
Committee may exercise such duties, power and authority with respect to Eligible
Recipients who are subject to Section 16 of the Exchange Act. Each
determination, interpretation or other action made or taken by the Committee
pursuant to the provisions of the Plan will be conclusive and binding for all
purposes and on all persons, and no member of the Committee will be liable for
any action or determination made in good faith with respect to the Plan or any
Incentive Award granted under the Plan.
(b) Authority of the Committee.
(i) In accordance with and subject to the provisions of the Plan, the
Committee will have the authority to determine all provisions of Incentive
Awards as the Committee may deem necessary or desirable and as consistent
with the terms of the Plan, including, without limitation, the following:
(A) the Eligible Recipients to be selected as Participants; (B) the nature
and extent of the Incentive Awards to be made to each Participant
(including the number of shares of Common Stock to be subject to each
Incentive Award, any exercise price, the manner in which
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Incentive Awards will vest or become exercisable and whether Incentive
Awards will be granted in tandem with other Incentive Awards) and the form
of written agreement, if any, evidencing such Incentive Award; (C) the time
or times when Incentive Awards will be granted; (D) the duration of each
Incentive Award; and (E) the restrictions and other conditions to which the
payment or vesting of Incentive Awards may be subject. In addition, the
Committee will have the authority under the Plan in its sole discretion to
pay the economic value of any Incentive Award in the form of cash, Common
Stock or any combination of both.
(ii) The Committee will have the authority under the Plan to amend
or modify the terms of any outstanding Incentive Award in any manner,
including, without limitation, the authority to modify the number of shares
or other terms and conditions of an Incentive Award, extend the term of an
Incentive Award, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Incentive Award, accept the
surrender of any outstanding Incentive Award or, to the extent not
previously exercised or vested, authorize the grant of new Incentive Awards
in substitution for surrendered Incentive Awards; provided, however that
the amended or modified terms are permitted by the Plan as then in effect
and that any Participant adversely affected by such amended or modified
terms has consented to such amendment or modification. No amendment or
modification to an Incentive Award, however, whether pursuant to this
Section 3(b) or any other provisions of the Plan, will be deemed to be a
regrant of such Incentive Award for purposes of this Plan.
(iii) In the event of (A) any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in corporate
structure or shares, (B) any purchase, acquisition, sale or disposition of
a significant amount of assets or a significant business, (C) any change in
accounting principles or practices, or (D) any other similar change, in
each case with respect to the Company or any other entity whose performance
is relevant to the grant or vesting of an Incentive Award, the Committee
(or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) may,
without the consent of any affected Participant, amend or modify the
vesting criteria of any outstanding Incentive Award that is based in whole
or in part on the financial performance of the Company (or any Subsidiary
or division thereof) or such other entity so as equitably to reflect such
event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the
board of directors of the surviving corporation) following such event as
prior to such event; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect.
(c) Cooperation Between Committees. The Committee and the Vital Images
Committee will reasonably cooperate with each other to promote the purposes of
the Plan.
Section 4. Shares Available for Issuance.
(a) Maximum Number of Shares Available. Subject to adjustment as provided
in Section 4(c) of the Plan, the maximum number of shares of Common Stock that
will be available for issuance under the Plan will be 410,000 shares of Common
Stock, plus any shares of Common Stock which, as of the date the Plan is
approved by the shareholders of the Company, are reserved for issuance under the
Company's 1988 Stock Option Plan, the 1990 Management Incentive Stock Option
Plan and the 1992 Stock Option Plan and which are not thereafter issued or which
have been issued but are subsequently
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forfeited and which would otherwise have been available for further issuance
under such plans. Notwithstanding any other provisions of the Plan to the
contrary, no Participant in the Plan may be granted any Options, or any other
Incentive Awards with a value based solely on an increase in the value of the
Common Stock after the date of grant, relating to more than 50,000 shares of
Common Stock in the aggregate in any fiscal year of the Company (subject to
adjustment as provided in Section 4(c) of the Plan); provided, however, that a
Participant who is first appointed or elected as an officer, hired as an
employee or retained as a consultant by the Company or who receives a promotion
that results in an increase in responsibilities or duties may be granted, during
the fiscal year of such appointment, election, hiring, retention or promotion,
Options or such other Incentive Awards relating to up to 200,000 shares of
Common Stock (subject to adjustment as provided in Section 4(c) of the Plan).
(b) Accounting for Incentive Awards. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Incentive Awards will
be applied to reduce the maximum number of shares of Common Stock remaining
available for issuance under the Plan. Any shares of Common Stock that are
subject to an Incentive Award that lapses, expires, is forfeited or for any
reason is terminated unexercised or unvested and any shares of Common Stock that
are subject to an Incentive Award that is settled or paid in cash or any form
other than shares of Common Stock will automatically again become available for
issuance under the Plan. Any shares of Common Stock that constitute the
forfeited portion of a Restricted Stock Award, however, will not become
available for further issuance under the Plan.
(c) Adjustments to Shares and Incentive Awards. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) will make appropriate
adjustment (which determination will be conclusive) as to the number and kind of
securities available for issuance under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants, the number, kind and,
where applicable, exercise price of securities subject to outstanding Incentive
Awards.
Section 5. Participation. Participants in the Plan will be those Eligible
Recipients who, in the judgment of the Committee, have contributed, are
contributing or are expected to contribute to the achievement of economic
objectives of the Employer or its Subsidiaries; provided, however, that
Participants will also include those individuals employed by Vital Images as of
the effective date of the Spin-Off who held Awards as of such date, whose Awards
will continue thereafter according to the terms and conditions of the Plan.
Eligible Recipients may be granted from time to time one or more Incentive
Awards, singly or in combination or in tandem with other Incentive Awards, as
may be determined by the Committee in its sole discretion. Incentive Awards will
be deemed to be granted as of the date specified in the grant resolution of the
Committee, which date will be the date of any related agreement with the
Participant.
Section 6. Options.
(a) Grant. An Eligible Recipient may be granted one or more Options under
the Plan, and such Options will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion. The Committee may designate whether an Option
is to be considered an Incentive Stock Option or a Non-Statutory Stock Option.
To the extent that any Incentive Stock Option granted under the Plan ceases for
any reason to qualify as an "incentive
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stock option" for purposes of Section 422 of the Code, such Incentive Stock
Option will continue to be outstanding for purposes of the Plan but will
thereafter be deemed to be a Non-Statutory Stock Option.
(b) Exercise Price. The per share price to be paid by a Participant upon
exercise of an Option will be determined by the Committee in its discretion at
the time of the Option grant, provided that (i) such price will not be less than
100% of the Fair Market Value of one share of Common Stock on the date of grant
with respect to an Incentive Stock Option (110% of the Fair Market Value if, at
the time the Incentive Stock Option is granted, the Participant owns, directly
or indirectly, more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation of the Company),
and (ii) such price will not be less than 85% of the Fair Market Value of one
share of Common Stock on the date of grant with respect to a Non-Statutory Stock
Option.
(c) Exercisability and Duration. An Option will become exercisable at such
times and in such installments as may be determined by the Committee in its sole
discretion at the time of grant; provided, however, that no Option may be
exercisable after 10 years from its date of grant.
(d) Payment of Exercise Price. The total purchase price of the shares to
be purchased upon exercise of an Option will be paid entirely in cash (including
check, bank draft or money order); provided, however, that the Committee, in its
sole discretion and upon terms and conditions established by the Committee, may
allow such payments to be made, in whole or in part, by tender of a Broker
Exercise Notice, Previously Acquired Shares, a promissory note (on terms
acceptable to the Committee in its sole discretion) or by a combination of such
methods.
(e) Manner of Exercise. An Option may be exercised by a Participant in
whole or in part from time to time, subject to the conditions contained in the
Plan and in the agreement evidencing such Option, by delivery in person, by
facsimile or electronic transmission or through the mail of written notice of
exercise to the Company (Attention: Secretary) at its principal executive office
in St. Paul, Minnesota and by paying in full the total exercise price for the
shares of Common Stock to be purchased in accordance with Section 6(d) of the
Plan.
Section 7. Restricted Stock Awards.
(a) Grant. An Eligible Recipient may be granted one or more Restricted
Stock Awards under the Plan, and such Restricted Stock Awards will be subject to
such terms and conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole discretion. The Committee may
impose such restrictions or conditions, not inconsistent with the provisions of
the Plan, to the vesting of such Restricted Stock Awards as it deems
appropriate, including, without limitation, that the Participant remain in the
continuous employ or service of the Employer or a Subsidiary of the Employer for
a certain period or that the Participant or the Employer (or any Subsidiary or
division thereof) satisfy certain performance goals or criteria.
(b) Rights as a Shareholder; Transferability. Except as provided in
Sections 7(a), 7(c) and 13(c) of the Plan, a Participant will have all voting,
dividend, liquidation and other rights with respect to shares of Common Stock
issued to the Participant as a Restricted Stock Award under this Section 7 upon
the Participant becoming the holder of record of such shares as if such
Participant were a holder of record of shares of unrestricted Common Stock.
(c) Dividends and Distributions. Unless the Committee determines otherwise
in its sole discretion (either in the agreement evidencing the Restricted Stock
Award at the time of grant or at any
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time after the grant of the Restricted Stock Award), any dividends or
distributions (including regular quarterly cash dividends) paid with respect to
shares of Common Stock subject to the unvested portion of a Restricted Stock
Award will be subject to the same restrictions as the shares to which such
dividends or distributions relate. In the event the Committee determines not to
pay such dividends or distributions currently, the Committee will determine in
its sole discretion whether any interest will be paid on such dividends or
distributions. In addition, the Committee in its sole discretion may require
such dividends and distributions to be reinvested (and in such case the
Participants consent to such reinvestment) in shares of Common Stock that will
be subject to the same restrictions as the shares to which such dividends or
distributions relate.
(d) Enforcement of Restrictions. To enforce the restrictions referred to
in this Section 7, the Committee may place a legend on the stock certificates
referring to such restrictions and may require the Participant, until the
restrictions have lapsed, to keep the stock certificates, together with duly
endorsed stock powers, in the custody of the Company or its transfer agent or to
maintain evidence of stock ownership, together with duly endorsed stock powers,
in a certificateless book-entry stock account with the Company's transfer agent.
Section 8. Performance Units. An Eligible Recipient may be granted one or
more Performance Units under the Plan, and such Performance Units will be
subject to such terms and conditions, consistent with the other provisions of
the Plan, as may be determined by the Committee in its sole discretion. The
Committee may impose such restrictions or conditions, not inconsistent with the
provisions of the Plan, to the vesting of such Performance Units as it deems
appropriate, including, without limitation, that the Participant remain in the
continuous employ or service of the Employer or any Subsidiary of the Employer
for a certain period or that the Participant or the Employer (or any Subsidiary
or division thereof) satisfy certain performance goals or criteria. The
Committee will have the sole discretion either to determine the form in which
payment of the economic value of vested Performance Units will be made to the
Participant (i.e., cash, Common Stock or any combination thereof) or to consent
to or disapprove the election by the Participant of the form of such payment.
Section 9. Stock Bonuses. An Eligible Recipient may be granted one or more
Stock Bonuses under the Plan, and such Stock Bonuses will be subject to such
terms and conditions, consistent with the other provisions of the Plan, as may
be determined by the Committee. The Participant will have all voting, dividend,
liquidation and other rights with respect to the shares of Common Stock issued
to a Participant as a Stock Bonus under this Section 9 upon the Participant
becoming the holder of record of such shares; provided, however, that the
Committee may impose such restrictions on the assignment or transfer of a Stock
Bonus as it deems appropriate.
Section 10. Effect of Termination of Employment or Other Service. The
transfer by a Participant of employment or other service from one Employer or
its Subsidiaries to the other Employer or its Subsidiaries will not be deemed to
constitute a termination of employment or other service for purposes of this
Plan.
(a) Termination Due to Death, Disability or Retirement. In the event a
Participant's employment or other service with the Employer and all of its
Subsidiaries is terminated by reason of death, Disability or Retirement:
(i) All outstanding Options then held by the Participant will become
immediately exercisable in full and will remain exercisable for a period of
one year (three months in the case
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of Retirement) after such termination (but in no event after the expiration
date of any such Option);
(ii) All Restricted Stock Awards then held by the Participant will
become fully vested; and
(iii) All Performance Units and Stock Bonuses then held by the
Participant will vest and/or continue to vest in the manner determined by
the Committee and set forth in the agreement evidencing such Performance
Units or Stock Bonuses.
(b) Termination for Reasons Other than Death, Disability or Retirement.
(i) In the event a Participant's employment or other service is
terminated with the Employer and all of its Subsidiaries for any reason
other than death, Disability or Retirement, or a Participant is in the
employ or service of a Subsidiary and the Subsidiary ceases to be a
Subsidiary of the Employer (unless the Participant continues in the employ
or service of an Employer or another Subsidiary thereof), all rights of the
Participant under the Plan and any agreements evidencing an Incentive Award
will immediately terminate without notice of any kind, and no Options then
held by the Participant will thereafter be exercisable, all Restricted
Stock Awards then held by the Participant that have not vested will be
terminated and forfeited, and all Performance Units and Stock Bonuses then
held by the Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement evidencing such
Performance Units or Stock Bonuses; provided, however, that if such
termination is due to any reason other than termination by the Employer or
any Subsidiary of the Employer for "cause," all outstanding Options then
held by such Participant will remain exercisable to the extent exercisable
as of such termination for a period of three months after such termination
(but in no event after the expiration date of any such Option).
(ii) For purposes of this Section 10(b), "cause" (as determined by
(x) the Committee if the Employer is the Company or a Subsidiary of the
Company or (y) the Vital Images Committee if the Employer is Vital Images
or a Subsidiary of Vital Images) will be as defined in any employment or
other agreement or policy applicable to the Participant or, if no such
agreement or policy exists, will mean (A) dishonesty, fraud,
misrepresentation, embezzlement or deliberate injury or attempted injury,
in each case related to the Employer or any Subsidiary, (B) any unlawful or
criminal activity of a serious nature, (C) any intentional and deliberate
breach of a duty or duties that, individually or in the aggregate, are
material in relation to the Participant's overall duties, or (D) any
material breach of any employment, service, confidentiality or noncompete
agreement entered into with either Employer or any Subsidiary thereof.
(c) Modification of Rights Upon Termination. Notwithstanding the other
provisions of this Section 10, upon a Participant's termination of employment or
other service with the Employer and all Subsidiaries of the Employer, the
Committee may, in its sole discretion (which may be exercised at any time on or
after the date of grant, including following such termination), cause Options
(or any part thereof) then held by such Participant to become or continue to
become exercisable and/or remain exercisable following such termination of
employment or service and Restricted Stock Awards, Performance Units and Stock
Bonuses then held by such Participant to vest and/or continue to vest or become
free of transfer restrictions, as the case may be, following such termination of
employment or service, in each case in the manner determined by the Committee;
provided, however, that no Option may remain exercisable beyond its expiration
date.
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(d) Breach of Confidentiality or Noncompete Agreements. Notwithstanding
anything in the Plan to the contrary, in the event that a Participant materially
breaches the terms of any confidentiality or noncompete agreement entered into
with either Employer or any Subsidiary thereof, whether such breach occurs
before or after termination of such Participant's employment or other service
with the Employer or any Subsidiary of the Employer, the Committee in its sole
discretion may immediately terminate all rights of the Participant under the
Plan and any agreements evidencing an Incentive Award then held by the
Participant without notice of any kind.
(e) Date of Termination of Employment or Other Service. Unless the
Committee otherwise determines in its sole discretion, a Participant's
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the
Employer or any Subsidiary of the Employer for which the Participant provides
employment or other service, as determined by the Committee or the Vital Images
Committee, as the case may be, in its sole discretion based upon such records.
Section 11. Payment of Withholding Taxes.
(a) General Rules. The Employer is entitled to (i) withhold and deduct
from future wages of the Participant (or from other amounts that may be due and
owing to the Participant from the Employer or any Subsidiary of the Employer),
or make other arrangements for the collection of, all legally required amounts
necessary to satisfy any and all federal, state and local withholding and
employment-related tax requirements attributable to an Incentive Award,
including, without limitation, the grant, exercise or vesting of, or payment of
dividends with respect to, an Incentive Award or a disqualifying disposition of
stock received upon exercise of an Incentive Stock Option, or (ii) require the
Participant promptly to remit the amount of such withholding to the Employer
before taking any action, including issuing any shares of Common Stock, with
respect to an Incentive Award.
(b) Special Rules. The Committee may, in its sole discretion and upon
terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or employment-
related tax obligation described in Section 11(a) of the Plan by electing to
tender Previously Acquired Shares, a Broker Exercise Notice or a promissory note
(on terms acceptable to the Committee in its sole discretion), or by a
combination of such methods.
Section 12. Change in Control.
(a) Change in Control. For purposes of this Section 12, a "Change in
Control" of the Company will mean the following, provided that it occurs after
the date on which the Company distributes (pursuant to that certain Distribution
Agreement, dated as of May 2, 1997, between Vital Images and the Company (the
"Distribution Agreement")) all of the outstanding shares of Vital Images' common
stock to the Company's shareholders of record on the Record Date (as defined in
the Distribution Agreement):
(i) the sale, lease, exchange or other transfer, directly or
indirectly, of substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to a person or entity
that is not controlled by the Company;
(ii) the approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
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(iii) a merger or consolidation to which the Company is a party if
the shareholders of the Company immediately prior to effective date of such
merger or consolidation have "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act), immediately following the effective date of
such merger or consolidation, of securities of the surviving corporation
representing (A) more than 50%, but not more than 80%, of the combined
voting power of the surviving corporation's then outstanding securities
ordinarily having the right to vote at elections of directors, unless such
merger or consolidation has been approved in advance by the Incumbent
Directors (as defined in Section 12(b) below), or (B) 50% or less of the
combined voting power of the surviving corporation's then outstanding
securities ordinarily having the right to vote at elections of directors
(regardless of any approval by the Incumbent Directors);
(iv) any person becomes after the effective date of the Plan the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of (A) 20% or more, but not 50% or more, of the
combined voting power of the Company's outstanding securities ordinarily
having the right to vote at elections of directors, unless the transaction
resulting in such ownership has been approved in advance by the Incumbent
Directors, or (B) 50% or more of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the Incumbent Directors);
(v) the Incumbent Directors cease for any reason to constitute at
least a majority of the Board; or
(vi) any other change in control of the Company of a nature that
would be required to be reported pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is then subject to such reporting
requirements.
(b) Incumbent Directors. For purposes of this Section 12, "Incumbent
Directors" of the Company will mean any individuals who are members of the Board
on the effective date of the Plan and any individual who subsequently becomes a
member of the Board whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Incumbent
Directors (either by specific vote or by approval of the Company's proxy
statement in which such individual is named as a nominee for director without
objection to such nomination).
(c) Acceleration of Vesting. Without limiting the authority of the
Committee under Section 3(b) of the Plan, if a Change in Control of the Company
occurs, then, unless otherwise provided by the Committee in its sole discretion
either in an agreement evidencing an Incentive Award at the time of grant or at
any time after the grant of an Incentive Award, (i) all Options will become
immediately exercisable in full and will remain exercisable for the remainder of
their terms, regardless of whether the Participants to whom such Options have
been granted remain in the employ or service of the Employer or any Subsidiary
of the Employer; (ii) all outstanding Restricted Stock Awards will become
immediately fully vested; and (iii) all Performance Units and Stock Bonuses then
held by the Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement evidencing such
Performance Unit or Stock Bonuses.
(d) Cash Payment for Options. If a Change in Control of the Company
occurs, then the Committee, if approved by the Committee in its sole discretion
either in an agreement evidencing an Incentive Award at the time of grant or at
any time after the grant of an Incentive Award, and without the consent of any
Participant effected thereby, may determine that some or all Participants
holding
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outstanding Options will receive, with respect to some or all of the shares of
Common Stock subject to such Options, as of the effective date of any such
Change in Control of the Company, cash in an amount equal to the excess of the
Fair Market Value of such shares immediately prior to the effective date of such
Change in Control of the Company over the exercise price per share of such
Options.
(e) Limitation on Change in Control Payments. Notwithstanding anything in
Section 12(c) or 12(d) of the Plan to the contrary, if, with respect to a
Participant, the acceleration of the vesting of an Incentive Award as provided
in Section 12(c) or the payment of cash in exchange for all or part of an
Incentive Award as provided in Section 12(d) (which acceleration or payment
could be deemed a "payment" within the meaning of Section 280G(b)(2) of the
Code), together with any other "payments" which such Participant has the right
to receive from the Company or any corporation that is a member of an
"affiliated group" (as defined in Section 1504(a) of the Code without regard to
Section 1504(b) of the Code) of which the Company is a member, would constitute
a "parachute payment" (as defined in Section 280G(b)(2) of the Code), then the
"payments" to such Participant pursuant to Section 12(c) or 12(d) of the Plan
will be reduced to the largest amount as will result in no portion of such
"payments" being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that if a Participant is subject to a separate agreement with
the Company or a Subsidiary that expressly addresses the potential application
of Sections 280G or 4999 of the Code (including, without limitation, that
"payments" under such agreement or otherwise will not be reduced or that the
Participant will have the discretion to determine which "payments" will be
reduced), then the limitations of this Section 12(e) will not apply, and any
"payments" to a Participant pursuant to Section 12(c) or 12(d) of the Plan will
be treated as "payments" arising under such separate agreement.
Section 13. Rights of Eligible Recipients and Participants;
Transferability.
(a) Employment or Service. Nothing in the Plan will interfere with or
limit in any way the right of the Employer or any Subsidiary of the Employer to
terminate the employment or service of any Eligible Recipient or Participant at
any time, nor confer upon any Eligible Recipient or Participant any right to
continue in the employ or service of the Employer or any Subsidiary of the
Employer.
(b) Rights as a Shareholder. As a holder of Incentive Awards (other than
Restricted Stock Awards and Stock Bonuses), a Participant will have no rights as
a shareholder unless and until such Incentive Awards are exercised for, or paid
in the form of, shares of Common Stock and the Participant becomes the holder of
record of such shares. Except as otherwise provided in the Plan, no adjustment
will be made for dividends or distributions with respect to such Incentive
Awards as to which there is a record date preceding the date the Participant
becomes the holder of record of such shares, except as the Committee may
determine in its discretion.
(c) Restrictions on Transfer. Except pursuant to testamentary will or the
laws of descent and distribution or as otherwise expressly permitted by the
Plan, no right or interest of any Participant in an Incentive Award prior to the
exercise or vesting of such Incentive Award will be assignable or transferable,
or subjected to any lien, during the lifetime of the Participant, either
voluntarily or involuntarily, directly or indirectly, by operation of law or
otherwise. A Participant will, however, be entitled to designate a beneficiary
to receive an Incentive Award upon such Participant's death, and in the event of
a Participant's death, payment of any amounts due under the Plan will be made
to, and exercise of any Options (to the extent permitted pursuant to Section 10
of the Plan) may be made by, the Participant's legal representatives, heirs and
legatees.
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(d) Non-Exclusivity of the Plan. Nothing contained in the Plan is intended
to modify or rescind any previously approved compensation plans or programs of
either Employer or any Subsidiary thereof or create any limitations on the power
or authority of the Board to adopt such additional or other compensation
arrangements as the Board may deem necessary or desirable.
Section 14. Securities Law and Other Restrictions. Notwithstanding any
other provision of the Plan or any agreements entered into pursuant to the Plan,
the Company will not be required to issue any shares of Common Stock under this
Plan, and a Participant may not sell, assign, transfer or otherwise dispose of
shares of Common Stock issued pursuant to Incentive Awards granted under the
Plan, unless (i) there is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state securities laws or
an exemption from such registration under the Securities Act and applicable
state securities laws, and (ii) there has been obtained any other consent,
approval or permit from any other regulatory body which the Committee, in its
sole discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or advisable by
the Company in order to comply with such securities law or other restrictions.
Section 15. Plan Amendment, Modification and Termination. The Board may
suspend or terminate the Plan or any portion thereof at any time, and may amend
the Plan from time to time in such respects as the Board may deem advisable in
order that Incentive Awards under the Plan will conform to any change in
applicable laws or regulations or in any other respect the Board may deem to be
in the best interests of the Company; provided, however, that no amendments to
the Plan will be effective without approval of the stockholders of the Company
if stockholder approval of the amendment is then required pursuant to Rule 16b-3
under the Exchange Act, Section 422 of the Code or the rules of any stock
exchange or Nasdaq. No termination, suspension or amendment of the Plan may
adversely affect any outstanding Incentive Award without the consent of the
affected Participant; provided, however, that this sentence will not impair the
right of the Committee to take whatever action it deems appropriate under
Sections 4(c) and 12 of the Plan.
Section 16. Effective Date and Duration of the Plan. The Plan is effective
as of December 18, 1995, the date it was adopted by the Board. The Plan will
terminate at midnight on December 18, 2005, and may be terminated prior to such
time to by Board action, and no Incentive Award will be granted after such
termination. Incentive Awards outstanding upon termination of the Plan may
continue to be exercised, or become free of restrictions, in accordance with
their terms.
Section 17. Miscellaneous.
(a) Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Minnesota.
(b) Successors and Assigns. The Plan will be binding upon and inure to the
benefit of the successors and permitted assigns of the Company and the
Participants.
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