Exhibit 10.1
BIO-VASCULAR, INC.
1990 MANAGEMENT INCENTIVE STOCK OPTION ADJUSTMENT PLAN
1. Background; Purpose of Plan.
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a. In or about 1990, Vital Images, Incorporated, an Iowa corporation
("VII"), adopted the Vital Images, Incorporated 1990 Management
Incentive Stock Option Plan (the "1990 Plan") for the purposes of
(i) attracting and retaining the best available officers,
directors and key employees for VII and (ii) providing additional
incentive to the officers, directors and key employees of VII.
b. In Section 1(k) of that certain Agreement and Plan of Merger by
and between VII and Bio-Vascular, Inc., a Minnesota corporation
("the Company") dated December 31, 1993 (the "Merger Agreement"),
the Company agreed to assume the rights and obligations of VII
with respect to options issued under the 1990 Plan which were
outstanding at the Effective Time, as defined in the Merger
Agreement. Pursuant to the Company's assumption of VII's
obligations under the 1990 Plan, each optionee under the 1990
Plan became entitled to purchase from the Company shares of the
Company's Common Stock (a "Company Option"), in an amount
determined under the provisions of the Merger Agreement, on the
same terms and conditions as set forth in the 1990 Plan, except
that shares of Company Common Stock were substituted for VII
Common Stock.
c. VII, the corporate name of which has been changed to Vital
Images, Inc. ("Vital Images") has entered into that certain
Distribution Agreement, dated as of May 2, 1997 (the
"Distribution Agreement"), between Vital Images and the Company,
pursuant to which the Company will distribute (the
"Distribution") all of the outstanding shares of Vital Images's
Common Stock to the Company's shareholders of record on the
Record Date (as defined in the Distribution Agreement). In
connection with the Distribution, each holder of a Company Option
as of the Record Date will be entitled to retain such Company
Option, provided that such Company Option will be adjusted to
reflect the Distribution (an "Adjusted Company Option"). In
addition, as of the Record Date, each holder of a Company Option
will also be entitled to receive an option to purchase Vital
Images Common Stock that will be adjusted to reflect the
Distribution (an "Adjusted Vital Images Option").
d. The sole purpose of this the Bio-Vascular, Inc. 1990 Management
Incentive Stock Option Adjustment Plan (the "Plan") is to provide
for the grant of such Adjusted Company Options, and no additional
option grants of any kind will be granted under this Plan.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee"), as hereinafter provided.
The Committee shall be appointed from time to time by the Board of
Directors and shall consist of not fewer than three of its members. However, if
the Board of Directors shall at any time
consist of three members or less, then such committee shall consist of the
entire Board of Directors. Members of the Board of Directors who serve on the
Committee shall be eligible to participate in the Plan. The Board of Directors
shall designate one of the members of the Committee as its Chairman. The
Committee shall hold its meetings at such times and places as it may determine.
A majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members and the Committee's
determinations shall constitute recommendations to the Board of Directors which
the Board shall have discretion to act upon. Any decision or determination
reduced to writing and signed by all members of the Committee shall be as
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary (who need not be a member of the
Committee).
For purposes of administration, the Committee, subject to the terms of
the Plan, shall have authority to establish such rules and regulations, make
such determinations and interpretations, as it deems necessary or advisable, and
all determinations and interpretations approved by the Board shall be final,
conclusive and binding on all persons, including persons granted options
hereunder ("Optionees") and their legal representatives and beneficiaries.
No member of the Committee or the Board of Directors shall be liable
for any act or omission with respect to his service on the Committee or with
respect to the Plan, if he acts in good faith and in a manner he reasonably
believes to be in or not opposed to the best interests of the Company.
The Committee and the name of the individuals administering the 1990 Plan
(the "Vital Images Committee") shall reasonably cooperate and communicate with
each other to promote the purposes of the Plan.
3. Stock Available for Options. There shall be available for options under
the Plan a total of 300,000 shares of Common Stock, subject to any adjustments
which may be made pursuant to Section 5(g). Shares of Stock with respect to
which options are granted pursuant to the Plan may be either authorized and
unissued shares, or previously issued shares held in the treasury of the
Company, or both. Shares of Stock covered by options which have terminated or
expired prior to exercise shall not be available for further options hereunder.
4. Eligibility. Options under the Plan shall be granted to officers,
directors or key employees of Employer ("Management") who hold outstanding
Company Options on the Record Date. For purposes of the Plan, "Employer" means
the Company if the participant renders services to the Company or any subsidiary
of the Company and means Vital Images if the participant renders services to
Vital Images or any subsidiary of Vital Images.
5. Terms and Conditions of Options. The Committee shall, in its
discretion, prescribe (for approval or rejection by the Board of Directors) the
terms and conditions of the options to be granted hereunder which shall be
evidenced by an option agreement, which terms and conditions need not be the
same in each case, subject to the following:
a. Number of Shares. Each option shall state the number of shares of
Common Stock to which it pertains.
b. Option Price. Each option shall state the price at which each
share of Stock covered by an option granted under the Plan shall
be purchased, which may be more or less than the then fair market
value of the Company's stock.
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c. Option Period. The period for exercise of an option (the "Option
Period") shall in no event be more than ten years from the date
on which the option is granted. With respect to each person who
is granted options under this Plan, the Committee and the Board
shall have the right, among other things, to determine that his
right to exercise such options shall vest, ratably, monthly or
annually, or otherwise, over a determined period (the "Vesting
Period"), except as provided in Section 5(e), commencing on the
date of grant. Any shares of Stock not purchased as the right to
exercise ratably accrues may be purchased thereafter at any time
before the expiration of the Option Period except as provided in
Section 5(e).
d. Exercise of Options. In order to exercise an option, the holder
thereof (the "Optionee") shall deliver to Company written notice
specifying the number of shares of Common Stock to be purchased,
and unless otherwise determined, together with a certified or
bank cashier's check payable to the order of the Company in the
full amount of the purchase price therefor. An Optionee shall
not have any rights of a stockholder until the shares of Stock
are issued to him. An option may not be exercised for less than
the lessor of (i) ten shares of Stock, or (ii) the number of
shares of Stock remaining subject to such option.
e. Effect of Termination of Employment or Directorship. The transfer
by a participant in the Plan of employment or other service from
one Employer or its subsidiaries to the other Employer and its
subsidiaries will not be deemed to constitute a termination of
employment or other service for purposes of the Plan.
Notwithstanding anything to the contrary in this Plan or any
option agreement issued hereunder, for employees of the Employer
whose positions of employment terminate within two years of the
commencement of such employment with the Employer, and for
directors of the Employer serving solely as a director (where
such persons are not employees of the Employer) whose position as
a director terminates within two years of the commencement of
such position, after such Optionee has ceased (for any reason) to
be in the employ of the Employer, or ceased (for any reason) to
be a director of the Employer if he is serving solely as a
director, options may only be exercised within a period of 90
days after such termination and only by payment of the purchase
price for all stock under option in cash or by certified check.
Nothing in the Plan or in any option granted pursuant to the
Plan shall be construed to confer on any individual any right to
continue in the employ of the Employer or interfere in any way
with the right of the Employer to terminate his employment at any
time.
f. Nontransferability of Options. During the lifetime of an
Optionee, options held by such Optionee shall be exercisable only
by him. No option shall be transferable other than by will or the
laws of descent and distribution.
g. Adjustments for Change in Stock Subject to Plan and Other Events.
Except as otherwise may be provided in the Option Agreement in
the event any of the following occurs after the Distribution
Date: a reorganization, recapitalization, stock split, stock
dividend, combination of shares, consolidation, merger (other
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than a merger or consolidation which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares), any sale or transfer by the Company of all
or substantially all of its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by
any person or group of all or a majority of the then outstanding
voting securities of the Company, rights offering, or any other
change in the corporate structure or rights with respect to any
shares of the Company, the Committee shall make such adjustments,
if any, in the number and kind of shares of Stock subject to the
Plan, in the number and kind of shares covered by outstanding
options, and/or in the option price per share to provide that the
Optionee shall have the right following such event, during the
period that such options shall be exercisable, to exercise such
options for the kind and amount of securities, cash and other
property receivable upon such event by a holder of the number and
kind of shares of Stock for which such options might have been
exercised immediately prior to such event.
The provisions of this paragraph (g) shall apply to any
outstanding options but in no event shall any option be
exercisable after the date of termination of the exercise period
of such option specified in Sections 5(c).
h. Registration, Listing and Qualification of Shares of
Stock/Shareholders Agreement. Each option shall be subject to
the requirements that if at any time the Stock covered thereby is
not registered, listed or qualified upon any securities exchange
or under any federal or state law, and (1) if the Board of
Directors shall determine that such registration, listing or
qualification or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or
in connection with, the granting of such option or the purchase
of shares of Stock thereunder, no such option may be exercised
unless and until such registration, listing, qualification,
consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors, or (2)
if the Board of Directors shall determine that such registration,
listing or qualification or the consent or approval of any
governmental regulatory body is not necessary and/or not
desirable as a condition of, or in connection with, the granting
of such option or the purchase of shares of Stock thereunder, the
Board of Directors may impose any conditions upon the exercise of
such options as it shall deem necessary or desirable in view of
such determination and no such option may be exercised unless and
until such conditions have been satisfied. Without limiting the
foregoing, the Company may require that any person exercising an
option shall make such representations and agreements and furnish
such information as the Company deems appropriate to assure
compliance with the foregoing or any other applicable legal
requirement.
Each option shall also be subject to the Optionee, on
exercise of such option, being required to execute a
Shareholders' Agreement in form and substance satisfactory to the
Board of Directors, providing for a right of first refusal in
favor of the Company and/or certain of its shareholders in
connection with the transfer of Stock and such other provisions
as shall be determined by the Board.
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i. Withholding of Taxes. No option may be exercised unless the
Optionee has paid, or has made provision satisfactory to the
Committee for payment of, Federal, state and local income taxes,
or any other taxes (other than stock transfer taxes) which the
Company or Vital Images may be obligated to collect as a result
of the issue or transfer of shares of Stock upon the exercise of
an option.
j. Other Terms and Conditions. The Committee may impose such other
terms and conditions, not inconsistent with the terms hereof, on
the grant or exercise of options, as it deems advisable.
6. Amendment and Termination. Unless the Plan shall theretofore have been
terminated as hereinafter provided, the Plan shall terminate on, and no option
shall be granted hereunder after, January 1, 2000; provided, however, that the
Board of Directors may at any time prior to that date terminate the Plan. The
Board of Directors may at any time amend the Plan. No termination or amendment
of the Plan may, without the consent of an Optionee, adversely affect the rights
of such Optionee with respect to any option held by such Optionee.
7. Other Actions. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including but not limited to, the right of the Company to grant options for
proper corporate purposes other than under the Plan to any officer, director,
employee or other person, firm, corporation or association.
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