EXHIBIT 4.1
As amended
November, 1992, November 16, 1994
and February 25, 1997
REHABILICARE INC.
1988 RESTATED
STOCK OPTION PLAN
1. Purpose of Plan.
This Plan shall be known as the "Rehabilicare Inc. 1988 Restated
Stock Option Plan" and is hereinafter referred to as the "Plan". The purpose of
the Plan is to aid in maintaining and developing personnel capable of assuring
the future success of Medical Devices, Inc., a Minnesota corporation ("MDI"), to
offer such personnel additional incentives to put forth maximum efforts for the
success of the business, and to afford them an opportunity to acquire a
proprietary interest in MDI through stock options as provided herein. Options
granted under this Plan may be either incentive stock options ("Incentive Stock
Options") within the meaning of Section 422A of the Internal Revenue Code of
1954, as in effect prior to January 1, 1987, or the Internal Revenue Code of
1986, whichever is applicable (the "Code"), or options which do not qualify as
Incentive Stock Options.
2. Prior Plans.
This Plan incorporates, amends, restates and supercedes the
Medical Devices, Inc. 1983 Restated Incentive Stock Option Plan (the "Prior MDI
ISO Plan"), as adopted by the Board of Directors on December 10, 1981 and
amended through January 31, 1987 and the Medical Devices, Inc. Stock Option Plan
(the "MDI NQ Plan"), as rewritten by the Board of Directors of MDI on January
12, 1981, (collectively, the "Prior Plans").
The outstanding options to purchase 158,000 Common Shares under
the Prior MDI ISO Plan and to purchase 67,000 Common Shares under the MDI NQ
Plan shall hereafter be governed by the terms and conditions of this Plan to the
extent not inconsistent with such Prior Plans and by each respective Prior Plan
to the extent of any inconsistencies.
3. Stock Subject to Plan.
Subject to the provisions of Section 13 hereof, the stock to be
subject to options under the Plan shall be MDI's authorized Common Stock, par
value $.10 per share. Such shares may be either authorized but unissued shares,
or issued shares which have been reacquired by MDI. Subject to the adjustment as
provided in Section 13 hereof, the maximum number of shares on which options may
be exercised under this Plan shall be 925,000 shares. If an option under the
Plan expires, or for any reason is terminated or unexercised with respect to any
shares, such shares shall again be available for options thereafter granted
during the term of the Plan.
4. Administration of Plan.
(a) The Plan shall be administered by a committee (the
"Committee") of one or more directors of MDI who are not also employees of MDI
and all of whom shall be "disinterested persons" with respect to the Plan within
the meaning of Rule 16b-3(d)(3) of the Securities and Exchange Commission. The
members of the Committee shall be appointed by and serve at the pleasure of the
Board of Directors.
(b) The Committee shall have plenary authority in its discretion,
but subject to the express provisions of this Plan, to determine: (i) the
purchase price of the Common Shares covered by each option, (ii) the employees
to whom and the time or times at which such options shall be granted and the
number of shares to be subject to each option, (iii) the terms of exercise of
each option, (iv) to accelerate the time at which all or any part of
an option may be exercised, (v) to amend or modify the terms of any option with
the consent of the optionee, (vi) to interpret the Plan, (vii) to prescribe,
amend and rescind rules and regulations relating to the Plan, (viii) to
determine the terms and provisions of each option agreement under this Plan
(which agreements need not be identical), including the designation of those
options intended to be Incentive Stock Options, and (ix) to make all other
determinations necessary or advisable for the administration of the Plan,
subject to the exclusive authority of the Board of Directors under Section 15
herein to amend or terminate the Plan. The Committee's determinations on the
foregoing matters, shall be final and conclusive.
(c) The Committee shall select one of its members as its Chairman
and 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 not less than a majority of its members. Any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The granting of an option pursuant to the Plan
shall be effective only if a written agreement shall have been duly executed and
delivered by and on behalf of MDI and the employee to whom such right is
granted. The Committee may appoint a Secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable.
5. Eligibility.
Incentive Stock Options may only be granted under this Plan to any full
or part-time employee (which term as used herein includes, but is not limited
to, officers and directors who are also employees) of MDI and of its present and
future subsidiary corporations (herein called "subsidiaries"). Members of the
Board of Directors of MDI, consultants or independent contractors providing
valuable services to MDI or one of its subsidiaries who are not also employees
thereof shall be eligible to receive options which do not qualify as Incentive
Stock Options. Notwithstanding the foregoing, no member of the Board of
Directors who is not also an employee shall be eligible to receive options under
the Plan, except as provided in Section 9 hereof. In determining the persons to
whom options shall be granted and the number of shares subject to each option,
the Committee may take into account the nature of services rendered by the
respective employees, their present and potential contributions to the success
of MDI and such other factors as the Committee in its discretion shall deem
relevant. A person who has been granted an option under this Plan may be granted
an additional option or options under the Plan if the Committee shall so
determine; provided, however, that (a) for Incentive Stock Options granted
before January 1, 1987, the aggregate fair market value (determined as of the
time the option is granted) of the Common Stock for which any employee may be
granted such Incentive Stock Options in any calendar year (under all plans
described in subsection (b)(8) of Section 422A of the Code of his employer
corporation and its parent and subsidiary corporations) shall not exceed
$100,000 plus any unused limit carryover to such year, determined in the manner
set forth in Section 422A (c)(4) of the Code, and (b) for Incentive Stock
Options granted after December 31, 1986, the aggregate fair market value
(determined at the time the Incentive Stock Option is granted) of the stock with
respect to which all Incentive Stock Options are exercisable for the first time
by an employee during any calendar year (under all plans described in subsection
(b)(7) of Section 422A of the Code of his employer corporation and its parent
and subsidiary corporations) shall not exceed $100,000. Notwithstanding any
other provision in this Plan, no person may be granted an Option or Options
under the Plan for more than 100,000 Shares in the aggregate in any one calendar
year period.
6. Price.
The option price for all Incentive Stock Options granted under
the Plan shall be determined by the Committee but shall not be less than 100% of
the fair market value of the Common Stock at the date of granting of such
option. The option price for options granted under the Plan which do not qualify
as Incentive Stock Options shall also be determined by the Committee but may be
less than 100% of the fair market value of the Common Stock. For purposes of the
preceding sentence and for all other valuation purposes under the Plan, the fair
market value of the Common Stock shall be as reasonably determined by the
Committee, but shall not be less than (i) the closing price of the stock as
reported for composite transactions, if the Common Stock is then traded on a
national securities exchange, (ii) the last sale price if the Common Stock is
then quoted on the NASDAQ National Market System or (iii) the average of the
closing representative bid and asked prices of the Common Stock as reported on
NASDAQ on the date as of which fair market value is being determined. If on the
date of grant of any option granted under the Plan, the Common Stock of MDI is
not publicly traded, the Committee shall make a good faith attempt to satisfy
the
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option price requirement of this Section 6 and in connection therewith shall
take such action as it deems necessary or advisable.
7. Term.
Each option and all rights and obligations thereunder shall,
subject to the provisions of Section 11, expire on the date determined by the
Committee and specified in the option agreement. The Committee shall be under no
duty to provide terms of like duration for options granted under the Plan, but
the term of an Incentive Stock Option may not extend more than ten (10) years
from the date of granting of such option.
8. Exercise of Option.
(a) The Committee shall have full and complete authority to
determine, subject to Section 10 herein, whether the option will be exercisable
in full at any time or from time to time during the term of the option, or to
provide for the exercise thereof in such installments, upon the occurrence of
such events and at such times during the term of the option as the Committee may
determine.
(b) No Incentive Stock Option granted before January 1, 1987,
shall be exercisable while there is outstanding (within the meaning of
subsection (c)(7) of Section 422A of the Code) any other Incentive Stock Option
which was previously granted to the optionee to purchase stock in MDI or in a
corporation which (at the time of the grant) was a parent or subsidiary
corporation of MDI, or a predecessor corporation of any of such corporations.
(c) The exercise of any option granted hereunder shall only be
effective at such time that the sale of Common Stock pursuant to such exercise
will not violate any state or federal securities or other laws.
(d) An optionee electing to exercise an option shall give written
notice to MDI of such election and of the number of shares subject to such
exercise. The full purchase price of such shares shall be tendered with such
notice of exercise. Payment shall he made to MDI either in cash (including
check, bank draft or money order), or, at the discretion of the Committee, (i)
by delivering MDI's Common Stock already owned by the optionee having a fair
market value equal to the full purchase price of the shares, or (ii) a
combination of cash and such shares; provided, however, that an optionee shall
not be entitled to tender shares of MDI's Common Stock pursuant to successive,
substantially simultaneous exercises of options granted under this or any other
stock option plan of MDI. The fair market value of such shares shall be
determined as provided in Section 6 herein. Until such person has been issued a
certificate or certificates for the shares subject to such exercise, he shall
possess no rights as a stockholder with respect to such shares.
9. Options to Non-employee Directors.
Each director of MDI who is not an employee of MDI or any of its
subsidiaries shall be granted an option to purchase 2,500 shares of Common Stock
on July 1 of each year. The option price shall be equal to 100% of the fair
market value on the date of grant. The options shall not qualify as incentive
stock options and shall be immediately exercisable in full for a period of five
years from the date of grant. Directors who are not also employees may also
receive, upon initial election to the Board of Directors, options that do not
qualify as incentive stock options to purchase such number of shares of common
stock, and with such terms, as the Committee shall determine; provided, however,
that no director who receives such an option shall serve as a member of the
Committee until twelve months after the date of grant of such an option.
10. Additional Restrictions.
The Committee shall have full and complete authority to determine
whether all or any part of the Common Stock of MDI acquired upon exercise of any
of the options granted under the Plan shall be subject to restrictions on the
transferability thereof or any other restrictions affecting in any manner the
optionee's rights with respect thereto, but any such restriction shall be
contained in the agreement relating to such options.
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11. Effect of Termination of Employment or Death.
(a) In the event that the holder of an Incentive Stock Option
shall cease to be employed by MDI or its subsidiaries, if any, for any reason
other than his gross and willful misconduct or his death or disability, such
holder shall have the right to exercise the option at any time within one month
after such termination of employment to the extent of the full number of shares
he was entitled to purchase under the option on the date of termination, subject
to the condition that no option shall be exercisable after the expiration of the
term of the option.
(b) In the event that the holder of an Incentive Stock Option
shall cease to be employed by MDI or its subsidiaries, if any, by reason of his
gross and willful misconduct during the course of his employment, including but
not limited to wrongful appropriation of funds of his employer or the commission
of a gross misdemeanor or felony, the option shall be terminated as of the date
of the misconduct.
(c) If the holder of an Incentive Stock Option shall die while in
the employ of MDI or a subsidiary, if any, or within one month after termination
of employment for any reason other than gross and willful misconduct, or become
disabled (within the meaning of Code Section 105(d)(4)) while in the employ of
MDI or a subsidiary, if any, and such optionee shall not have fully exercised
the Incentive Stock Option, such option may be exercised at any time within
twelve months after his death or such disability by the personal
representatives, administrators, or if applicable guardian, of the optionee or
by any person or persons to whom the option is transferred by will or the
applicable laws of descent and distribution, to the extent of the full number of
shares he was entitled to purchase under the option on the date of death,
disability or termination of employment, if earlier, and subject to the
condition that no option shall be exercisable after the expiration of the term
of the option.
(d) Nothing in the Plan or in any agreement thereunder shall
confer on any employee any right to continue in the employ of MDI or any of its
subsidiaries or affect, in any way, the right of MDI or any of its subsidiaries
to terminate his employment at any time.
12. 10-Percent Shareholder Rule.
Notwithstanding any other provision in the Plan, if at the time
an option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Section 425(d) of the Code) Common
Stock of MDI possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of MDI or its parent or subsidiary corporations,
if any, (within the meaning of Section 422A(b)(6) of the Code) then any
Incentive Stock Option to be granted to such optionee pursuant to the Plan shall
satisfy the requirements of Section 422A(c)(8) of the Code, and the option price
shall be not less than 110% of the fair market value of the Common Stock of MDI
determined as described herein, and such option by its terms shall not be
exercisable after the expiration of five (5) years from the date such option is
granted.
13. Non-Transferability.
No option granted under the Plan shall be transferable by an
optionee, otherwise than by will or the laws of descent or distribution as
provided in Section 11(c) herein. During the lifetime of an optionee the option
shall be exercisable only by such optionee.
14. Dilution or Other Adjustments.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend (of whatever
amount), stock split or other change in the corporate structure, appropriate
adjustments in the Plan and outstanding options shall be made by the Committee.
In the event of any such changes, adjustments shall include, where appropriate,
changes in the aggregate number of shares subject to the Plan, the number of
shares and the price per share subject to outstanding options, in order to
prevent dilution or enlargement of option rights.
15. Amendment or Discontinuance of Plan.
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The Board of Directors may amend or discontinue the Plan at any
time. Subject to the provisions of Section 16 no amendment of the Plan, however,
shall without stockholder approval: (i) increase the maximum number of shares
under the Plan as provided in Section 3 herein, (ii) decrease the minimum option
price provided in Section 6 herein, (iii) extend the maximum option term under
Section 7, or (iv) materially modify the eligibility requirements for
participation in the Plan. The Board of Directors shall not alter or impair any
option theretofore granted under the Plan without the consent of the holder of
the option.
16. Time of Granting.
Nothing contained in the Plan or in any resolution adopted or to
be adopted by the Board of Directors or by the stockholders of MDI, and no
action taken by the Committee or the Board of Directors (other than the
execution and delivery of an option), shall constitute the granting of an option
hereunder.
17. Effective Date and Termination of Plan.
(a) The Plan was approved by the Board of Directors on August 18,
1988 and shall be approved by stockholders before August 18, 1989.
(b) Unless the Plan shall have been discontinued as provided in
Section 14 hereof, the Plan shall terminate August 18, 1998. No option may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee, alter or impair any rights or obligations under any
option theretofore granted.
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