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Exhibit 10.11
ORTHOPAEDIC BIOSYSTEMS LTD., INC.
1998 DIRECTOR OPTION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment of the Plan. Orthopaedic Biosystems Ltd., Inc., an
Arizona corporation (the "Company"), establishes the "Orthopaedic Biosystems
Ltd., Inc. 1998 Director Option Plan" (the "Plan") for its Nonemployee
Directors, as set forth in this document. The Plan grants Nonqualified Stock
Options to Nonemployee Directors, subject to the terms below.
Subject to the approval of the Plan by the Company's shareholders, the
Plan will become effective July 8, 1998 (the "Effective Date"). However, Options
granted under the Plan will be canceled if the Plan is not approved by the
Company's shareholders.
1.2 Purpose of the Plan. The purpose of the Plan is to further the
Company's short- and long-term objectives by attracting and retaining the
services of Nonemployee Directors of outstanding competence and by linking the
personal interests of Nonemployee Directors to those of the Company's
shareholders.
1.3 Duration of the Plan. The Plan will begin on the Effective Date and
shall remain in effect until all Stock under the Plan has been granted or
purchased according to the Plan's provisions or until the Board of Directors
exercises its right to terminate the Plan. However, no shares of Stock or Option
may be granted under the Plan after July 8, 2008.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Annual Grant Date" means the third business day following
the public release of the Company's fiscal year-end earnings
information.
(b) "Board" or "Board of Directors" means the Board of
Directors of Orthopaedic Biosystems Ltd., Inc., and includes any
committee of the Board of Directors designated by the Board to
administer part or all of this Plan.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "Committee" means the committee of the Board of Directors
appointed by the Board to administer this Plan.
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(e) "Company" means Orthopaedic Biosystems Ltd., Inc., an
Arizona corporation, or any successor thereto as provided in Section
9.2 herein.
(f) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor Act thereto.
(g) "Fair Market Value" means the fair market value of such
Stock as determined by the Board in its discretion, under one of the
following methods: (i) the closing price for the Stock as reported on
any national securities exchange on which the Stock is then listed
(which shall include the Nasdaq National Market) for that date or, if
no price is so reported for that date, such price on the next preceding
date for which the closing price was reported; or (ii) the price as
determined by such methods or procedures as may be established from
time to time by the Board.
(h) "Nonemployee Director" means any individual who is a
member of the Board of Directors, but who is not otherwise an employee
of the Company.
(i) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares, granted under Article 7, which is not intended to be
an incentive stock option qualifying under Code Section 422.
(j) "Option" means a Nonqualified Stock Option under this
Plan.
(k) "Participant" means a Nonemployee Director of the Company
who has outstanding an award granted under the Plan.
(l) "Stock" means the shares of common stock of Orthopaedic
Biosystems Ltd., Inc.
2.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
2.3 Severability. In the event that a court of competent jurisdiction
determines that any portion of this Plan is in violation of any statute, common
law, or public policy, then only such portion shall be stricken. All portions of
this Plan that do not violate any statute or public policy shall continue in
full force and effect.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Board or a
Committee of two or more Nonemployee Directors appointed by the Board to
administer the Plan, subject to the
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restrictions set forth in this Plan. Except as otherwise provided, reference to
the Committee shall refer to the Board if the Board does not appoint a Committee
to administer the Plan.
3.2 Administration by the Committee. The Committee shall have full
power, discretion, and authority to interpret and administer this Plan in a
manner which is consistent with the Plan's provisions. However, in no event
shall the Committee have the power to take any action that would result in the
Plan not being treated as a formula plan under Section 16 of the Exchange Act.
3.3 Decisions Binding. All decisions made by the Committee pursuant to
the provisions of the Plan, and all related orders or resolutions of the
Committee shall be final, conclusive, and binding on all persons, including the
Company, its stockholders, employees, Participants, and their estates and
beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the total number of shares of Stock available for grant under the Plan
may not exceed 100,000. The Stock issued may be authorized and unissued Stock or
Stock reacquired by the Company, as determined by the Committee.
4.2 Lapsed Awards. If any Option granted under this Plan terminates,
expires, or lapses for any reason, any Stock subject to purchase pursuant to
such Option again shall be available for grant under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Stock combination, or other change in the corporate
structure of the Company affecting the Stock, the number and/or type of Stock
subject to any outstanding Award, the Option exercise price per share under any
outstanding Option, will be automatically adjusted so that the proportionate
interests of the Participants will be maintained as before the occurrence of
such event. Any adjustment pursuant to this Section 4.3 will be conclusive and
binding for all purposes of this Plan.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Persons eligible to participate in this Plan are
limited to Nonemployee Directors.
5.2 Actual Participation. All eligible Nonemployee Directors shall
receive Option grants pursuant to Article 6.
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ARTICLE 6. OPTION GRANTS
6.1 Annual Grant of Options. Subject to the limitation on the number
of shares that may be awarded under this Plan, each Nonemployee Director shall
be granted an Option to purchase 1,500 shares of Stock on each Annual Grant
Date. The Option granted pursuant to this Section 6.1 shall be immediately
vested and exercisable as of the relevant Annual Grant Date.
6.2 Initial Grant. Subject to the limitation on the number of shares
that may be awarded under this Plan, each Nonemployee Director who first becomes
a Director after the Effective Date shall be granted an Option to purchase 5,000
shares of Stock as of such date. The Option granted pursuant to this Section 6.2
shall be immediately vested and exercisable.
6.3 Individual Award Agreement. Each Option grant shall be evidenced by
an individual agreement that will not include any terms or conditions that are
inconsistent with the terms and conditions of this Plan.
6.4 Option Price. The purchase price per share available for purchases
under an Option granted pursuant to this Article 6 shall be equal to the Fair
Market Value on the Annual Grant Date or on the date the Director first becomes
a Director, as the case may be.
6.5 Duration of Options. Unless earlier terminated, forfeited, or
surrendered pursuant to a provision of this Plan, each Option granted under this
Article 6 shall expire on the tenth anniversary date of its grant.
6.6 Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Secretary of the Company, setting forth the number of
shares with respect to which the Option is to be exercised, accompanied by full
payment for the Stock. The Option price upon exercise of any Option shall be
payable to the Company in full either: (a) in cash or its acceptable equivalent,
or (b) by tendering previously acquired Stock having a Fair Market Value at the
time of exercise equal to the total Option price (provided that the Stock
tendered upon Option exercise have been held by the Participant for at least six
(6) months prior to their tender to satisfy the Option price), or (c) by a
combination of (a) and (b). The proceeds from such a payment shall be added to
the general funds of the Company and shall be used for general corporate
purposes.
6.7 Restrictions on Share Transferability. To the extent necessary to
ensure that Options granted under this Article 6 comply with applicable law, the
Board shall impose restrictions on any Stock acquired pursuant to the exercise
of an Option under this Article 6, including, without limitation, restrictions
under applicable Federal securities laws, under the requirements of any stock
exchange or market upon which such Stock is then listed and/or traded, and under
any blue sky or state securities laws applicable to such Stock.
6.8 Termination of Service on the Board of Directors. If the service of
a Participant on the Board terminates for any reason any outstanding Options
that are not vested as of such date shall
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be forfeited. The Options that are otherwise exercisable as of the date of such
termination shall be exercisable by the Participant for one year after such
termination, unless the Options expire earlier under Section 6.5.
6.9 Nontransferability of Options. No Option granted under this Article
6 may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, all Options granted to a Participant under this Article 6 shall be
exercisable during his or her lifetime only by such Participant.
ARTICLE 7. AMENDMENT, MODIFICATION, AND TERMINATION
7.1 Amendment, Modification, and Termination. The Board may, at any
time and from time to time, terminate, amend or modify the Plan; provided,
however that to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
7.2 Awards Previously Granted. Unless required by law, no termination,
amendment, or modification of this Plan shall in any manner adversely affect any
Option previously granted under this Plan, without the written consent of the
Participant holding such Option.
ARTICLE 8. MISCELLANEOUS
8.1 Beneficiary Designation. Each Participant under this Plan may, from
time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under this Plan is to be paid
in the event of his or her death. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
8.2 Successors. All obligations of the Company under this Plan, with
respect to Options, cash or Stock granted hereunder, shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
8.3 Requirements of Law. The granting of Options, cash and Stock under
the Plan shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required. Notwithstanding any other provision set forth in this Plan, the
Committee may, at its sole discretion, terminate, amend, or modify this Plan in
any way necessary to comply with the applicable requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission as interpreted pursuant to
no-action letters and interpretive releases.
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8.4 Governing Law. This Plan, and all agreements hereunder, shall be
governed by the laws of the State of Arizona.
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