Exhibit 10.1
HEALTH FITNESS CORPORATION
2005 STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment. Health Fitness Corporation (the "Company") hereby
establishes a plan providing for the grant of stock options to certain eligible
employees, directors and consultants of the Company and its subsidiaries. This
plan shall be known as the 2005 Stock Option Plan (the "Plan").
1.2 Purpose. The purpose of the Plan is to advance the interests of the
Company and its shareholders by enabling the Company to attract and retain
persons of ability as employees, directors and consultants, 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 long-term economic objectives.
ARTICLE 2. DEFINITIONS
The following terms shall have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Change in Control" means an event described in Article 11 below.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means the entity administering the Plan, as provided in
Article 3 below.
2.5 "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 4.3 below.
2.6 "Disability" means the occurrence of an event which constitutes
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.
2.7 "Eligible Persons" means individuals who are (a) salaried employees
(including, without limitation, officers and directors who are also employees)
of the Company, (b) Non-Employee Directors, or (c) consultants to the Company.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 "Fair Market Value" means, with respect to the Common Stock, as of any
date:
(a) 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
Stock Market, the mean between the reported high and low sale prices of
the Common Stock on such exchange or by the NASDAQ Stock 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); or
(b) if the Common Stock is not listed or admitted to unlisted
trading privileges or reported on the Nasdaq Stock Market, and bid and
asked prices therefor in the over-the-counter market are reported by the
National Quotation Bureau, Inc. (or any comparable reporting service), the
mean of the closing bid and asked prices as of such date, as reported by
the National Quotation Bureau, Inc. (or a comparable reporting service);
or
(c) if the Common Stock is not listed or admitted to unlisted
trading privileges, or reported on the NASDAQ Stock Market, and bid and
asked prices are not reported, the price that the Committee determines in
good faith in the exercise of its reasonable discretion. 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
Optionees and their respective successors-in-interest. No member of the
Board or the Committee shall be liable for any determination regarding
current value of the Common Stock that is made in good faith.
2.10 "Incentive Stock Option" means a right to purchase Common Stock
granted to an Optionee pursuant to Section 6.5 of the Plan that qualifies as an
incentive stock option within the meaning of Section 422 of the Code.
2.11 "Non-Employee Director" means any member of the Board who is not an
employee of the Company or any Subsidiary.
2.12 "Non-Statutory Stock Option" means a right to purchase Common Stock
granted to an Optionee pursuant to Section 6.5 of the Plan that does not qualify
as an Incentive Stock Option.
2.13 "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.14 "Optionee" means an Eligible Person who receives one or more
Incentive Stock Options or Non-Statutory Stock Options under the Plan.
2.15 "Person" means any individual, corporation, partnership, group,
association or other "person" (as such term is used in Section 14(d) of the
Exchange Act), other than the Company, a wholly owned subsidiary of the Company
or any employee benefit plan sponsored by the Company.
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2.16 "Retirement" means the retirement of an Optionee pursuant to and in
accordance with the regular retirement plan or practice of the Company or the
Subsidiary employing the Optionee.
2.17 "Securities Act" means the Securities Act of 1933, as amended.
2.18 "Subsidiary" means any corporation that is a subsidiary corporation
of the Company (within the meaning of Section 424(f) of the Code).
2.19 "Tax Date" means a date defined in Section 6.4(e) or Section 6.5(c)
of the Plan.
ARTICLE 3. PLAN ADMINISTRATION
The Plan shall be administered by the Board or by a Committee of the Board
consisting of two or more directors who shall be appointed by and serve at the
pleasure of the Board. As long as the Company's securities are registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, then,
to the extent necessary for compliance with Rule 16b-3, or any successor
provision, each of the members of the Committee shall be a 'Non-Employee
Director.' For purposes of this paragraph, 'Non-Employee Director' shall have
the same meaning as set forth in Rule 16b-3, or any successor provision, as then
in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended. Members of a Committee, if established, shall be
appointed from time to time by the Board, shall serve at the pleasure of the
Board and may resign at any time upon written notice to the Board. A majority of
the members of the Committee shall constitute a quorum. The Committee shall act
by majority approval of its members, shall keep minutes of its meetings and
shall provide copies of such minutes to the Board. Action of the Committee may
be taken without a meeting if unanimous written consent thereto is given. Copies
of minutes of the Committee's meetings and of its actions by written consent
shall be provided to the Board and kept with the corporate records of the
Company. As used in this Plan, the term "Committee" will refer either to the
Board or to such a Committee, if established.
In accordance with the provisions of the Plan, the Committee shall select
the Optionees from Eligible Persons; shall determine the number of shares of
Common Stock to be subject to Options granted pursuant to the Plan, the time at
which such Options are granted, the Option exercise price, Option period and the
manner in which each such Option vests or becomes exercisable; and shall fix
such other provisions of such Options as the Committee may deem necessary or
desirable and as consistent with the terms of the Plan. The Committee shall
determine the form or forms of the agreements with Optionees which shall
evidence the particular terms, conditions, rights and duties of the Company and
the Optionees under Options granted pursuant to the Plan. The Committee shall
have the authority, subject to the provisions of the Plan, to establish, adopt
and revise such rules and regulations relating to the Plan as it may deem
necessary or advisable for the administration of the Plan. With the consent of
the Optionee affected thereby, the Committee may amend or modify the terms of
any outstanding Incentive Stock Option or Non-Statutory Stock Option in any
manner, provided that the amended or modified terms are permitted by the Plan as
then in effect. Without limiting the generality of the foregoing sentence, the
Committee may, with the consent of the Optionee affected thereby, modify the
exercise price, number of shares or other terms and conditions of an Option,
extend
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the term of an Option, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Option, extend, renew or accept the
surrender of any outstanding Option to the extent not previously exercised, and
the Committee may authorize the grant of new Options in substitution therefor to
the extent not previously exercised.
Each determination, interpretation or other action made or taken by the
Committee pursuant to the provisions of the Plan shall be conclusive and binding
for all purposes and on all persons, including, without limitation, the Company
and its Subsidiaries, the shareholders of the Company, the Committee and each of
the members thereof, the directors, officers and employees of the Company and
its Subsidiaries, and the Optionees and their respective successors in interest.
No member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under the Plan.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number. The maximum number of shares of Common Stock that shall be
reserved for issuance under the Plan shall be Three Million Five Hundred
Thousand (3,500,000), subject to adjustment upon changes in the capitalization
of the Company as provided in Section 4.3 below. Shares of Common Stock that may
be issued upon exercise of Options shall be applied to reduce the maximum number
of shares of Common Stock remaining available for use under the Plan.
4.2 Unused Stock. Any shares of Common Stock that are subject to an Option
(or any portion thereof) that lapses, expires or for any reason is terminated
unexercised shall automatically again become available for use under the Plan.
4.3 Change in Shares, Adjustments, Etc. If the number of outstanding
shares of Common Stock is increased or decreased or changed into or exchanged
for a different number or kind of shares of stock or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, combination of shares, rights offering 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) shall make appropriate adjustment as to
the number and kind of securities subject to and reserved under the Plan and, in
order to prevent dilution or enlargement of the rights of Optionees, the number
and kind of securities subject to outstanding Options. Any such adjustment in
any outstanding Option shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the Option but with an
appropriate adjustment in the price for each share or other unit of any security
covered by the Option. However, no change shall be made in the terms of any
outstanding Incentive Stock Options as a result of any such change in the
corporate structure or shares of the Company, without the consent of the
Optionee affected thereby, that would disqualify that Incentive Stock Option
from treatment under Section 422 of the Code or would be considered a
modification, extension or renewal of an option under Section 424(h)of the code.
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ARTICLE 5. ELIGIBILITY
Incentive Stock Options or Non-Statutory Stock Options shall be granted
only to those Eligible Persons who, in the judgment of the Committee, are
performing, or during the term of an Option, will perform, vital services in the
management, operation and development of the Company or a Subsidiary, and
significantly contribute or are expected to significantly contribute to the
achievement of long-term corporate economic objectives. Optionees may be granted
from time to time one or more Incentive Stock Options and/or Non-Statutory Stock
Options under the Plan, in any case as may be determined by the Committee in its
sole discretion. The number, type, terms and conditions of Options granted to
various Eligible Persons need not be uniform, consistent or in accordance with
any plan, whether or not such Eligible Persons are similarly situated. The
Committee may grant both an Incentive Stock Option and a Non-Statutory Stock
Option to the same Optionee at the same time or at different times. Incentive
Stock Options and Non-Statutory Stock Options, whether granted at the same or
different times, shall be deemed to have been awarded in separate grants, shall
be clearly identified, and in no event will the exercise of one Option affect
the right to exercise any other Option or affect the number of shares of Common
Stock for which any other Option may be exercised. Upon determination by the
Committee that an Option is to be granted to an Optionee, written notice shall
be given such person specifying such terms, conditions, rights and duties
related thereto. Each Optionee shall enter into an agreement with the Company,
in such form as the Committee shall determine and which is consistent with the
provisions of the Plan, specifying the terms, conditions, rights and duties of
Incentive Stock Options and Non-Statutory Stock Options granted under the Plan.
Options shall be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date shall be the date of the related
agreement with the Optionee.
ARTICLE 6. DURATION AND EXERCISE
6.1 Manner of Option Exercise. An Option may be exercised by an Optionee
in whole or in part from time to time, subject to the conditions contained
herein and in the agreement evidencing such Option, by delivery, in person or
through certified or registered mail, or written notice of exercise to the
Company at its principal executive office (Attention: Secretary), and by paying
in full the total Option exercise price for the shares of Common Stock purchased
in accordance with Section 6.3. Such notice shall be in a form satisfactory to
the Committee and shall specify the particular Option (or portion thereof) that
is being exercised and the number of shares with respect to which the Option is
being exercised. Subject to Section 9.1, the exercise of the Option shall be
deemed effective upon receipt of such notice and payment. As soon as practicable
after the effective exercise of the Option, the Company shall record on the
stock transfer books of the Company the ownership of the shares purchased in the
name of the Optionee, and the Company shall deliver to the Optionee one or more
duly issued stock certificates evidencing such ownership.
6.2 Method of Payment of Option Exercise Price. At the time of the
exercise of an Incentive Stock Option or a Non-Statutory Stock Option, the
Optionee may determine whether the total purchase price of the shares to be
purchased shall be paid solely in cash or by transfer from the Optionee to the
Company of previously acquired shares of Common Stock, or by a combination
thereof. In the event the Optionee elects to pay the purchase price in whole or
in part with previously acquired shares of Common Stock, the value of such
shares shall be equal to
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their Fair Market Value on the date of exercise. The Committee may reject an
Optionee's election to pay all or part of the purchase price with previously
acquired shares of Common Stock and require such purchase price to be paid
entirely in cash if, in the sole discretion of the Committee, payment in
previously acquired shares would cause the Company to be required to recognize a
charge to earnings in connection therewith. For purposes of this Section 6.2,
"previously acquired shares" shall include both shares of Common Stock that are
already owned by the Optionee at the time of exercise and shares of Common Stock
that are to be acquired pursuant to the exercise of the Option concerned. In its
sole discretion, the Committee may determine either at the time of grant or
exercise of an Incentive Stock Option or a Non-Statutory Stock Option, to permit
a Optionee to pay all or any portion of the purchase price by deliver of a
promissory note in form and substance acceptable to the Committee.
6.3 Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares of Common Stock covered by an Option
until the Optionee shall have become the holder of record of such shares, and no
adjustment shall be made for dividends or other distributions or other rights as
to which there is a record date preceding the date the Optionee becomes the
holder of record except as the Committee may determine pursuant to Section 4.3.
6.4 Incentive Stock Options.
(a) Incentive Stock Option Exercise Price. The per share price to be
paid by the Optionee at the time an Incentive Stock Option is exercised
will be determined by the Committee, but shall not be less than (i) 100%
of the Fair Market Value of one share of Common Stock on the date the
Option is granted, or (ii) 110% of the Fair Market Value of one share of
Common Stock on the date the Option is granted if, at that time the Option
is granted, the Optionee owns, directly or indirectly (as determined
pursuant to Section 424(d) of the Code), more than 10% of the total
combined voting power of all classes of stock of the Company, any
Subsidiary or any parent corporation of the Company (within the meaning of
Section 424(e) of the Code).
(b) Aggregate Limitation of Stock Subject to Incentive Stock
Options. Notwithstanding any other provision of the Plan, the aggregate
Fair Market Value (determined as of the date an Incentive Stock Option is
granted) of the shares of Common Stock with respect to which Incentive
Stock Options (within the meaning of Section 422 of the Code) are
exercisable for the first time by an Optionee during any calendar year
(under the Plan and any other incentive stock option plans of the Company,
any Subsidiary or any parent corporation of the Company (within the
meaning of Section 424(e) of the Code)) shall not exceed $100,000 (or such
other amount as may be prescribed by the Code from time to time; provided,
however, that if the exercisability or vesting of an Incentive Stock
Option is accelerated as permitted under the provisions of this Plan and
such acceleration would result in a violation of the limit imposed by this
Section 6.4(b), such acceleration shall be of full force and effect but
the number of shares of Common Stock which exceed such limit shall be
treated as having been granted pursuant to a Non-Statutory Stock Option;
and provided, further, that the limits imposed by this Section 6.4(b)
shall be applied to all outstanding Incentive Stock Options (under this
Plan and any other incentive stock option plans of the Company, any
Subsidiary or
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any parent corporation of the Company (within the meaning of Section
424(e) of the Code)) in chronological order according to the dates of
grant.
(c) Duration of Incentive Stock Options. The period during which an
Incentive Stock Option may be exercised shall be fixed by the Committee at
the time such Option is granted, but in no event shall such period exceed
ten years from the date the Option is granted or, in the case of any
Optionee that owns, directly or indirectly (as determined pursuant to
Section 424(d) of the Code) more than 10% of the total combined voting
power of all classes of stock of the Company, any Subsidiary or any parent
corporation of the Company (within the meaning of Section 424(e) of the
Code), five years from the date the Incentive Stock Option is granted. An
Incentive Stock Option shall become exercisable at such times and in such
installments (which may be cumulative) as shall be determined by the
Committee at the time the Option is granted. Upon the completion of its
exercise period, an Incentive Stock Option, to the extent not then
exercised, shall expire. Except as otherwise provided in Article 7 or 11,
all Incentive Stock Options granted to an Optionee hereunder shall
terminate and may no longer be exercised if the Optionee ceases to be an
employee of the Company and all Subsidiaries or if the Optionee is an
employee of a Subsidiary and the Subsidiary ceases to be a Subsidiary of
the Company (unless the Optionee continues as an employee of the Company
or another Subsidiary).
(d) Disposition of Common Stock Acquired Pursuant to the Exercise of
Incentive Stock Options. Prior to making a disposition (as defined in
Section 424(c) of the Code) of any shares of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option granted under the
Plan before the expiration of two years after the date on which the Option
was granted or before the expiration of one year after the date on which
such shares of Common Stock were transferred to the Optionee pursuant to
exercise of the Option, the Optionee shall send written notice to the
Company of the proposed date of such disposition, the number of shares to
be disposed of, the amount of proceeds to be received from such
disposition and any other information relating to such disposition that
the Company may reasonably request. The right of an Optionee to make any
such disposition shall be conditioned on the receipt by the Company of all
amounts necessary to satisfy any federal, state or local withholding tax
requirements attributable to such disposition. The Committee shall have
the right, in its sole discretion, to endorse the certificates
representing such shares with a legend restricting transfer and to cause a
stop transfer order to be entered with the Company's transfer agent until
such time as the Company receives the amounts necessary to satisfy such
withholding requirements or until the later of the expiration of two years
from the date the Option was granted or one year from the date on which
such shares were transferred to the Optionee pursuant to the exercise of
the Option.
(e) Withholding Taxes. The Company shall be entitled to withhold and
deduct from future wages of the Optionee all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Optionee's exercise of an Incentive Stock Option or a
"disqualifying disposition" of shares acquired through the exercise of an
Incentive Stock Option as defined in Code
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Section 421(b). In the event the Optionee is required to pay the Company,
or make arrangements satisfactory to the Company respecting payment of,
such withholding and employment-related taxes, the Committee may, in its
discretion and pursuant to such rules as it may adopt, permit the Optionee
to satisfy such obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock otherwise issuable to the Optionee
as a result of the exercise of the Incentive Stock Option, or by electing
to deliver to the Company already-owned shares of Common Stock, in either
case having a Fair Market Value equal to the minimum required tax
withholding, based on the minimum statutory withholding rates for federal
and state tax purposes, including payroll taxes, that are applicable to
the supplemental income resulting from such exercise or disqualifying
disposition. In no event may the Company withhold shares having a Fair
Market Value in excess of such statutory minimum required tax withholding.
The Optionee's election to have shares withheld or to deliver
already-owned shares of Common Stock shall be irrevocable and shall be
made on or before the date the Incentive Stock Option is exercised or, if
later, the date that the amount of tax to be withheld is determined under
applicable tax law (the "Tax Date"). Such election shall be subject to
approval by the Committee and shall otherwise comply with such rules as
the Committee may adopt to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable. If
shares of Common Stock are issued to the Optionee prior to the Tax Date
and Optionee elects to have shares withheld, the Optionee shall agree in
writing to surrender that number of shares on the Tax Date having an
aggregate Fair Market Value equal to such minimum required tax
withholding.
6.5 Non-Statutory Stock Options.
(a) Option Exercise Price. The per share price to be paid by the
Optionee at the time a Non-Statutory Stock Option is exercised will be
determined by the Committee, but shall not be less than 85% of the Fair
Market Value of one share of Common Stock on the date the Option is
granted.
(b) Duration of Non-Statutory Stock Options. The period during which
a Non-Statutory Stock Option may be exercised shall be fixed by the
Committee at the time such Option is granted, but in no event shall such
period exceed 10 years and one month from the date the Option is granted.
A Non-Statutory Stock Option shall become exercisable at such times and in
such installments (which may be cumulative) as shall be determined by the
Committee at the time the Option is granted. Upon the completion of its
exercise period, a Non-Statutory Stock Option, to the extent not then
exercised, shall expire. Except as otherwise provided in Articles 7 or 11,
all Non-Statutory Stock Options granted hereunder to an Optionee who is an
employee of the Company or any Subsidiaries shall terminate and may no
longer be exercised if the Optionee ceases to be an employee of the
Company or a Subsidiary or if the Optionee is an employee of a Subsidiary
and the Subsidiary ceases to be a Subsidiary of the Company (unless the
Optionee continues as an employee of the Company or another Subsidiary). A
Non-Statutory Stock Option granted hereunder to an Optionee who is not an
employee of the
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Company or a Subsidiary will terminate as determined by the Committee at
the time of grant.
(c) Withholding Taxes.
(i) The Company is entitled to (aa) withhold and deduct from
future wages of the Optionee, or make other arrangements for the
collection of, all legally required amounts necessary to satisfy any
federal, state or local withholding tax requirements attributable to
the Optionee's exercise of a Non-Statutory Stock Option or otherwise
incurred with respect to the Option, or (bb) require the Optionee
promptly to remit the amount of such withholding to the Company
before acting on the Optionee's notice of exercise or the Option.
(ii) The Committee may, in its discretion and pursuant to such
rules as it may adopt, permit the Optionee to satisfy any
withholding tax obligation, in whole or in part, by electing to have
the Company withhold shares of Common Stock otherwise issuable to
the Optionee as a result of the exercise of the Nonqualified Stock
Option, or by electing to deliver to the Company already-owned
shares of Common Stock, in either case having a Fair Market Value
equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to the supplemental
income resulting from such exercise. In no event may the Company
withhold shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Optionee's election
to have shares withheld or to deliver already-owned shares of Common
Stock shall be irrevocable and shall be made on or before the date
the Nonqualified Stock Option is exercised or, if later, the date
that the amount of tax to be withheld is determined under applicable
tax law (the "Tax Date"). Such election shall be subject to approval
by the Committee and shall otherwise comply with such rules as the
Committee may adopt to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if
applicable. If shares of Common Stock are issued to the Optionee
prior to the Tax Date and Optionee elects to have shares withheld,
the Optionee shall agree in writing to surrender that number of
shares on the Tax Date having an aggregate Fair Market Value equal
to such minimum required tax withholding.
ARTICLE 7. EFFECT OF TERMINATION OF EMPLOYMENT ON OPTIONS
7.1 Termination of Employment or Other Service Due to Death, Disability or
Retirement. In the event an Optionee's employment or other service is terminated
with the Company and all Subsidiaries by reason of his death, Disability or
Retirement, all outstanding Incentive Stock Options and Non-Statutory Stock
Options then held by the Optionee shall become immediately exercisable in full
and remain exercisable for a period of three months in the case of Retirement
and one year in the case of death or Disability, provided, however, that an
exercise may not occur after the expiration date thereof in any event. The
Company shall
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undertake to use its best efforts to notify the Optionee or his heirs or
representatives, as the case may be, of the last date by which Options may be
exercised pursuant to this Section 7.1, at least thirty (30) days in the case of
Retirement and at least sixty (60) days in the case of death or Disability,
prior to such date.
7.2 Termination of Employment or Other Service for Reasons Other than
Death, Disability or Retirement.
(a) Except as otherwise provided in Article 11 or as otherwise
determined by the Committee at the time of grant of an Incentive Stock
Option, in the event an Optionee's employment or other service is
terminated with the Company and all Subsidiaries for any reason other than
his death, Disability or Retirement, each Incentive Stock Option then held
by the Optionee shall completely terminate on the earlier of (i) the close
of business on the three-month anniversary date of such termination of
employment and (ii) the expiration date of such Incentive Stock Option. In
such period following termination of employment, the Incentive Stock
Option shall be exercisable only to the extent the Option was exercisable
on the vesting date immediately preceding such termination of employment
but had not previously been exercised. To the extent an Incentive Stock
Option is not exercisable on the date of termination of employment or if
the Optionee does not exercise the Option within the time specified in
this subsection (a), all rights of the Optionee under the Plan and such
Incentive Stock Option shall terminate.
(b) Except as otherwise provided in Article 11 and subsection (c)
below, in the event an Optionee's employment or other service is
terminated with the Company and all Subsidiaries for any reason other than
his death, Disability or Retirement no Non-Statutory Stock Option then
held by the Optionee shall thereafter be exercisable.
(c) Notwithstanding the provisions of subsection (b) above, upon an
Optionee's termination of employment or other service with the Company and
all Subsidiaries, the Committee may, in its sole discretion (which may be
exercised before or following such termination), cause Non-Statutory Stock
Options then held by such Optionee to become exercisable and to remain
exercisable following such termination of employment or other service in
the manner determined by the Committee; provided, however, that no Option
shall be exercisable after the expiration date thereof in any event.
7.3 Date of Termination. For purposes of the Plan, an Optionee's
employment or other service shall be deemed to have terminated on the date that
the Optionee ceases to perform services for the Company or the last day of the
pay period covered by the Optionee's final paycheck, as the case may be.
Notwithstanding the foregoing, the employee Optionee shall not be deemed to have
ceased to be an employee for purposes of the Plan until the later of the 91st
day of any bona fide leave of absence approved by the Company or a Subsidiary
for the Optionee (including, without limitation any layoff) or the expiration of
the period of any bona fide leave of absence approved by the Company or a
Subsidiary for the Optionee (including without limitation any layoff) during
which the Optionee's right to reemployment is guaranteed either by statute or
contract.
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ARTICLE 8. RIGHTS OF EMPLOYEES; OPTIONEES
8.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Subsidiary to terminate the employment of
any Eligible Person or Optionee at any time, nor confer upon any Eligible Person
or Optionee any right to continue in the employ of the Company or any
Subsidiary.
8.2 Nontransferability. No right or interest of any Optionee in an Option
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Optionee, either voluntarily or involuntarily, or subjected to
any lien, directly or indirectly, by operation of law, or otherwise, including
execution, levy, garnishment, attachment, pledge or bankruptcy. In the event of
an Optionee's death, an Optionee's rights and interest in any Options shall be
transferable by testamentary will or the laws of descent and distribution, and
payment of any amounts due under the Plan shall be made to, and exercise of any
Options (to the extent permitted pursuant to Section 7.1) may be made by, the
Optionee's legal representatives, heirs or legatees. If in the opinion of the
Committee an Optionee holding any Option is disabled from caring for his or her
affairs because of mental condition, physical condition or age, any payments due
the Optionee may be made to, and any rights of the Optionee under the Plan shall
be exercised by, such Optionee's guardian, conservator or other legal personal
representative upon furnishing the Committee with evidence satisfactory to the
Committee of such status.
8.3 Non-Exclusivity of the Plan. Nothing contained in the Plan is intended
to amend, modify or rescind any previously approved compensation plans or
programs entered into by the Company. The Plan will be construed to be an
addition to any and all such other plans or programs. Neither the adoption of
the Plan nor the submission of the Plan to the shareholders of the Company for
approval will be construed as creating 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.
ARTICLE 9. SHARE ISSUANCE AND TRANSFER RESTRICTIONS
9.1 Share Issuances. Notwithstanding any other provision of the Plan or
any agreements entered into pursuant hereto, the Company shall not be required
to issue or deliver any certificate for shares of Common Stock under this Plan
(and an Option shall not be considered to be exercised, notwithstanding the
tender by the Optionee of any consideration therefor), unless and until each of
the following conditions has been fulfilled:
(a) (i) there shall be in effect with respect to such shares a
registration statement under the Securities Act and any applicable state
securities laws if the Committee, in its sole discretion, shall have
determined to file, cause to become effective and maintain the
effectiveness of such registration statement; or (ii) if the Committee has
determined not to so register the shares of Common Stock to be issued
under the Plan, (A) exemptions from registration under the Securities Act
and applicable state securities laws shall be available for such issuance
(as determined by counsel to the Company) and (B) there shall have been
received from the Optionee (or, in the event of death or disability, the
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Optionee's heir(s) or legal representative(s)) any representations or
agreements requested by the Company in order to permit such issuance to be
made pursuant to such exemptions; and
(b) there shall have been obtained any other consent, approval or
permit from any state or federal governmental agency which the Committee
shall, in its sole discretion upon the advice of counsel, deem necessary
or advisable.
9.2 Share Transfer. Shares of Common Stock issued pursuant to the exercise
of Options granted under the Plan may not be sold, assigned, transferred,
pledged, encumbered or otherwise disposed of (whether voluntarily or
involuntarily) except pursuant to registration under the Securities Act and
applicable state securities laws or pursuant to exemptions from such
registrations. The Company may condition the sale, assignment, transfer, pledge,
encumbrance or other disposition of such shares not issued pursuant to an
effective and current registration statement under the Securities Act and all
applicable state securities laws on the receipt from the party to whom the
shares of Common Stock are to be so transferred of any representations or
agreements requested by the Company in order to permit such transfer to be made
pursuant to exemptions from registration under the Securities Act and applicable
state securities laws.
9.3 Legends. Unless a registration statement under the Securities Act is
in effect with respect to the issuance or transfer of shares of Common Stock
issued under the Plan, each certificate representing any such shares shall be
endorsed with a legend in substantially the following form, unless counsel for
the Company is of the opinion as to any such certificate that such legend is
unnecessary:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR UNDER APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
ARTICLE 10. 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 Stock Options and Non-Statutory Stock
Options under the Plan shall conform to any change in applicable laws or
regulations or in any other respect that the Board may deem to be in the best
interests of the Company; provided, however, that no amendment shall, either
directly or indirectly, (a) materially increase the total number of shares of
Common Stock as to which Options may be granted under the Plan, except as
provided in Section 4.3 of the Plan; (b)
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materially increase the benefits accruing to Optionees under the Plan; or (c)
materially modify the requirements as to eligibility for participation in the
Plan without the approval of the shareholders, but only if such approval is
required for compliance with the requirements of any applicable law or
regulation; and provided, further, that the Plan may not, without the approval
of the shareholders, be amended in any manner that will cause Incentive Stock
Options to fail to meet the requirements of Internal Revenue Code Section 422.
No termination, suspension or amendment of the Plan shall alter or impair any
outstanding Option without the consent of the Optionee affected thereby;
provided, however, that this sentence shall not impair the right of the
Committee to take whatever action it deems appropriate under Section 4.3.
ARTICLE 11. CHANGE IN CONTROL
If, during the term of an Option, (i) the Company merges or consolidates
with any other corporation and is not the surviving corporation after such
merger or consolidation; (ii) the Company transfers all or substantially all of
its business and assets to any other person; or (iii) more than 50% of the
Company's outstanding voting shares are purchased by any other person, the
Committee may, in its sole discretion, provide for the acceleration of the right
to exercise the option prior to the anticipated effective date of any of the
foregoing transactions or take any other action as it may deem appropriate to
further the purposes of this Plan or protect the interests of the Optionee.
ARTICLE 12. EFFECTIVE DATE OF THE PLAN
12.1 Effective Date. The Plan is effective as of February 26, 2005,
subject to the approval of the shareholders within 12 months. If shareholder
approval is not obtained within such 12-month period, any Incentive Stock Option
previously granted under this Plan shall be deemed to be a Non-Statutory Stock
Option.
12.2 Duration of the Plan. The Plan shall terminate at midnight on
December 15, 2014, and may be terminated prior thereto by Board action, and no
Options shall be granted after such termination. Options outstanding upon
termination of the Plan may continue to be exercised in accordance with their
terms.
ARTICLE 13. MISCELLANEOUS
13.1 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Minnesota
without regard to the conflict of laws provisions of any jurisdictions. All
parties agree to submit to the jurisdiction of the state and federal courts of
Minnesota with respect to matters relating to the Plan and agree not to raise or
assert the defense that such forum is not convenient for such party.
13.2 Gender and Number. Except when otherwise indicated by the context,
reference to the masculine gender in the Plan shall include, when used, the
feminine gender and any term used in the singular shall also include the plural.
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13.3 Construction. Wherever possible, each provision of this Plan shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Plan shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Plan.
13.4 Successors and Assigns. This Plan shall be binding upon and inure to
the benefit of the successors and permitted assigns of the Company, including,
without limitation, whether by way of merger, consolidation, operation of law,
assignment, purchase or other acquisition of substantially all of the assets or
business of the Company, and any and all such successors and assigns shall
absolutely and unconditionally assume all of the Company's obligations under the
Plan.
13.5 Survival of Provisions. The rights, remedies, agreements, obligations
and covenants contained in or made pursuant to the Plan, any agreement
evidencing an Option and any other notices or agreements in connection
therewith, including, without limitation, any notice of exercise of an Option,
shall survive the execution and delivery of such notices and agreements and the
delivery and receipt of shares of Common Stock and shall remain in full force
and effect.
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